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Costly Enforcement of Property Rights and the Coase Theorem

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  • Alex Robson

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  • 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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Bibliographic Info

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

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

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References

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Citations

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Cited by:
  1. Hao Jia & Stergios Skaperdas & Samarth Vaidya, 2012. "Contest Functions: Theoretical Foundations and Issues in Estimation," Working Papers 111214, University of California-Irvine, Department of Economics.
  2. Stergios Skaperdas & Samarth Vaidya, 2007. "Persuasion as a Contest," CESifo Working Paper Series 2160, CESifo Group Munich.
  3. MacKenzie, Ian A. & Ohndorf, Markus, 2013. "Restricted Coasean bargaining," Journal of Public Economics, Elsevier, Elsevier, vol. 97(C), pages 296-307.
  4. Michael McBride & Stergios Skaperdas, 2009. "Conflict, Settlement, and the Shadow of the Future," Working Papers 080922, University of California-Irvine, Department of Economics.
  5. Robson, Alex, 2012. "Transaction Costs can Encourage Coasean Bargaining," MPRA Paper 40892, University Library of Munich, Germany.
  6. Vaidya, Samarth, 2001. "Analyzing Corruption Possibilities in the Gaze of the Media," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. E. Guzzini & A. Palestrini, 2012. "Coase theorem and exchangeable rights in non-cooperative games," European Journal of Law and Economics, Springer, Springer, vol. 33(1), pages 83-100, February.
  8. 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.
  9. Julia Hiscock & David E. Hojman, 2004. "Where Have All the Flowers Gone? Coase Theorem Failures in English Summer Cultural Events: The Case of Sidmouth International Festival," Research Papers, University of Liverpool Management School 200406, University of Liverpool Management School.
  10. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Working Papers 060705, University of California-Irvine, Department of Economics.
  11. Ian A. MacKenzie & Markus Ohndorf, 2013. "Caps on Coasean Transfers," Discussion Papers Series 485, School of Economics, University of Queensland, Australia.
  12. Zuleta, Hernando & Villaveces, Marta Juanita & Andonova, Veneta, 2013. "Conflict and negotiation in Colombia: Are pre-donations useful?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 47(C), pages 105-117.

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