The article develops R. H. Coase’s insight that the level of transaction costs in the market determines the amount of externalities, thus providing arguments against government intervention. Contrary to Coase, however, we argue that the level of transaction costs cannot be considered as given,...

The concept of a barrier to entry has been discussed least since Bain (1956) with important contributions by Spence (1977), Dixit (1980) or Milgrom and Roberts (1982). The more recent discussion is synthesized in the contributions to a dedicated session at the 2004 AEA meeting. Yet, a “barrier...