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Property rights and investments: An evolutionary approach

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  • Andreozzi, Luciano

Abstract

When contracts are not enforceable, or property rights are not clearly defined, individuals may lack an incentive to carry out costly investments even when they are socially efficient. Some recent contributions such as Ellingsen and Robles (2002) prove that this problem may be less dramatic than standard economic models would suggest. They propose evolutionary models in which only efficient equilibria can be (stochastically) stable. In this paper we show that these results are not robust with respect to the introduction of individual heterogeneity. When individuals have different cost functions, stochastically stable states may be inefficient, even when they induce a positive (suboptimal) level of investment.

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  • Andreozzi, Luciano, 2012. "Property rights and investments: An evolutionary approach," Games and Economic Behavior, Elsevier, vol. 74(1), pages 1-11.
    • Handle: RePEc:eee:gamebe:v:74:y:2012:i:1:p:1-11
    DOI: 10.1016/j.geb.2011.07.001
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    Cited by:

    1. Kevin Hasker, 2014. "The Emergent Seed: A Representation Theorem for Models of Stochastic Evolution and two formulas for Waiting Time," Levine's Working Paper Archive 786969000000000954, David K. Levine.
    2. L. Bagnoli & G. Negroni, 2013. "Egalitarianism. An evolutionary perspective," Working Papers wp888, Dipartimento Scienze Economiche, Universita' di Bologna.

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    More about this item

    Keywords

    Specific investment; Evolution; Fairness; Heterogeneous agents;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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