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Restricted Coasean bargaining

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  • MacKenzie, Ian A.
  • Ohndorf, Markus

Abstract

We investigate the efficiency of Coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes. When property rights are costly to (defend) appropriate, we find that bargaining restrictions may be Pareto superior to unconstrained voluntary exchange. Under cost uncertainty over the harmful activity, we show that an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions. For an all-pay auction, we find conditions where precluding bargaining is always ex ante preferable to unrestricted bargaining. For cases where the restrictions are contested, we show conditions for the continuing existence of welfare improvements.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 97 (2013)
Issue (Month): C ()
Pages: 296-307

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Handle: RePEc:eee:pubeco:v:97:y:2013:i:c:p:296-307

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Coase theorem; Bargaining restrictions; Contest; All-pay auction;

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References

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  1. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer, vol. 8(2), pages 291-305.
  2. Michael R. Baye & Dan Kovenock & Casper De Vries, 2000. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," CESifo Working Paper Series 373, CESifo Group Munich.
  3. Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2006. "Should courts always enforce what contracting parties write?," LSE Research Online Documents on Economics 4677, London School of Economics and Political Science, LSE Library.
  4. Luca Anderlini & Leonardo Felli, 1999. "Costly Bargaining and Renegotiation," CESifo Working Paper Series 213, CESifo Group Munich.
  5. Serizawa, Shigehiro & Weymark, John A., 2003. "Efficient strategy-proof exchange and minimum consumption guarantees," Journal of Economic Theory, Elsevier, vol. 109(2), pages 246-263, April.
  6. Anbarci, Nejat & Skaperdas, Stergios & Syropoulos, Constantinos, 2002. "Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects," Journal of Economic Theory, Elsevier, vol. 106(1), pages 1-16, September.
  7. Stergios Skaperdas & Constantinos Syropoulos, 2002. "Insecure Property and the Efficiency of Exchange," Economic Journal, Royal Economic Society, vol. 112(476), pages 133-146, January.
  8. Alex Robson & Stergios Skaperdas, 2008. "Costly enforcement of property rights and the Coase theorem," Economic Theory, Springer, vol. 36(1), pages 109-128, July.
  9. Luca Anderlini & Leonardo Felli, 2003. "Transaction Costs and the Robustness of the Coase Theorem," Working Papers gueconwpa~03-03-27, Georgetown University, Department of Economics.
  10. Chung, Tai-Yeong, 1992. "On the Social Optimality of Liquidated Damage Clauses: An Economic Analysis," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(2), pages 280-305, April.
  11. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
  12. Usher, Dan, 1998. "The Coase theorem is tautological, incoherent or wrong," Economics Letters, Elsevier, vol. 61(1), pages 3-11, October.
  13. Martin Kolmar, 2008. "Perfectly Secure Property Rights and Production Inefficiencies in Tullock Contests," Southern Economic Journal, Southern Economic Association, vol. 75(2), pages 441-456, October.
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Cited by:
  1. Ian A. MacKenzie & Markus Ohndorf, 2013. "Caps on Coasean Transfers," Discussion Papers Series 485, School of Economics, University of Queensland, Australia.
  2. Ian A. MacKenzie & Markus Ohndorf, 2014. "Coasean Bargaining in the Presence of Pigouvian Taxation: Revisiting the Buchanan-Stubblebine-Turvey Theorem," Discussion Papers Series 515, School of Economics, University of Queensland, Australia.

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