Which of the following is not an assumption of Coase theorem related to externalities and environmental problems?

Correct option is B

Correct Option: B. Presence of income effect
Explanation:
The Coase Theorem states that if property rights are well-defined and transaction costs are zero, bargaining between parties will lead to an efficient outcome regardless of who initially holds the rights.
Information Booster:

• Income effect is NOT an assumption of the Coase Theorem
  
• The theorem assumes income effects are negligible - that the distribution of wealth doesn't affect the valuation of the externality
  
• When income effects are significant, the initial assignment of property rights can affect the efficient outcome
  

Additional Knowledge:

• Option A. Absence of transaction costs - Critical assumption for efficient bargaining
  
• Option C. Complete information - Both parties must know each other's costs and benefits
  
• Option D. Complete property rights - Rights must be clearly defined and enforceable