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Costly Enforcement of Property Rights and the Coase Theorem

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Author Info
Alex Robson ()
Stergios Skaperdas ()

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Abstract

We examine a setting in which property rights are initially ambiguously defined. Whether the parties go to court to remove the ambiguity or bargain and settle privately, they incur enforcement costs. When the parties bargain, a version of the Coase theorem holds. Despite the additional costs of going to court, other ex post inefficiencies, and the absence of incomplete information, however, going to court may be an equilibrium or ex ante Pareto-superior over settlement; this is especially true in dynamic settings whereby a court decision saves on future enforcement costs. When the parties do not negotiate and go to court the Coase theorem ceases to hold, and a simple rule for the initial assignment of rights maximizes net surplus.

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Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANUCBE School of Economics Working Papers with number 2005-455.

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Length: 34 pages
Date of creation: Jun 2005
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Handle: RePEc:acb:cbeeco:2005-455

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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  1. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
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  2. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September. [Downloadable!] (restricted)
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  3. Glazer, Amihai & Konrad, Kai A., 1999. "Taxation of rent-seeking activities," Journal of Public Economics, Elsevier, vol. 72(1), pages 61-72, April. [Downloadable!] (restricted)
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  4. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September. [Downloadable!] (restricted)
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  5. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September. [Downloadable!] (restricted)
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  6. Jung, Chulho & Krutilla, Kerry & Kip Viscusi, W. & Boyd, Roy, 1995. "The coase theorem in rent-seeking society," International Review of Law and Economics, Elsevier, vol. 15(3), pages 259-268, September. [Downloadable!] (restricted)
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  8. Hirshleifer, Jack & Osborne, Evan, 2001. " Truth, Effort, and the Legal Battle," Public Choice, Springer, vol. 108(1-2), pages 169-95, July. [Downloadable!] (restricted)
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  11. Hurwicz, Leonid, 1995. "What is the Coase Theorem?," Japan and the World Economy, Elsevier, vol. 7(1), pages 49-74, May. [Downloadable!] (restricted)
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  16. Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June. [Downloadable!] (restricted)
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  17. Coase, R H, 1992. "The Institutional Structure of Production," American Economic Review, American Economic Association, vol. 82(4), pages 713-19, September. [Downloadable!] (restricted)
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  22. Katz, Avery, 1988. "Judicial decisionmaking and litigation expenditure," International Review of Law and Economics, Elsevier, vol. 8(2), pages 127-143, December. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Defence and Peace Economics, Taylor and Francis Journals, vol. 17(6), pages 657-676, December. [Downloadable!] (restricted)
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  2. Michael McBride & Stergios Skaperdas, 2009. "Conflict, Settlement, and the Shadow of the Future," Working Papers 080922, University of California-Irvine, Department of Economics. [Downloadable!]
  3. Skaperdas, Stergios / Vaidya, Samarth, 2007. "Persuasion as a Contest," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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