The above persuasion of the roommate by me for not playing harmonium during the day is called the Coase theorem.
The Coase theorem in law and economics describes the economic effectiveness of a financial decision or results in the existence of externalities.
According to the Coase Theorem, when there is a conflict between property rights, the parties involved can bargain and negotiate terms that fully reflect the actual costs as well as underlying factors of the relevant property rights, leading to the most efficient conclusion.
The Coase theorem has been utilized by jurists including legal scholars to analyze and settle legal issues. It is regarded as a key foundation for the majority of contemporary economic studies of governmental regulation, particularly in the context of externalities.
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