Contracting for Environmental Property Rights: The Case of Vittel

Abstract

Based on a real case of contracting for environmental property rights, we explore several implications of Coase's insights. The case study adds empirical content to basic transaction costs concepts by analysing the design and implementation of a contractual arrangement between a pollutee—a bottler of mineral water—and several polluting farmers. We analyse the bargaining between the two parties to determine how transaction cost issues (valuation disputes, bilateral monopoly conditions and third‐party effects) were overcome and how they succeeded in contracting for environmental property rights. We compare the Vittel case with other similar cases to draw lessons for environmental rights negotiations.