Final answer:
The Coase Theorem's relevance in the Pacific Islands lies in informing better-defined property rights to manage environmental concerns and resource allocation, considering the unique challenges posed by the region's geography and economy.
Step-by-step explanation:
The Coase Theorem is essentially a theory related to economics and law that addresses how to deal with environmental externality issues, such as who should bear the responsibility for addressing the costs associated with externalities. In the context of the Pacific Islands, understanding the relevance of the Coase Theorem can inform better-defined property rights to achieve an optimal allocation of resources and manage environmental concerns. The Pacific Islands face unique challenges due to their isolated geography, vulnerability to environmental impacts, and reliance on natural resources. While the Coase Theorem suggests that in the absence of transaction costs, parties can negotiate to solve externality problems privately, the Pacific Islands' context might involve high transaction costs and small issues becoming more significant due to small-scale economies. As a result, applying the theorem could lead to clearer property rights and potential negotiations to improve economic activities such as tourism while mitigating pollution and environmental damage.