Coase Theorem says that if the transaction fee is negligible then we will have an efficient allocation of resources.
In some of the samples, they quote that it doesn't matter who has the right to pollute. If people own the river, they will sue polluters and get money. If the polluters own the river, the people will pay the polluters to stop polluting.
It seems that the Coase Theorem presume that if a deal can be made, it will be made.
What about if both the polluters and the river owners (the people) can be better off by striking some deals but they don't make deals because they wait till better deals come along.
Say the river owners want more money for pollution?
Can I say that the transaction costs go up?
Notice that once they agree they can just pay with a credit card and hence there is no transaction fee. However, they play a game of chicken first or whatever to get deals coming up.
Does that mean transaction costs go up and hence, Coase Theorem fails?