The central allocative decision confronting a judge in a nuisance dispute should not concern the identity of the initial entitlement recipient but rather the identity of the more efficient chooserthe litigant who can more efficiently allocate the entitlement. We show that liability rules can produce four basic allocations which differ centrally in the ways in which courts delegate to litigants the authority to ultimately allocate the entitlement. Two classes concern "single chooser" rules that vest (in the absence of an agreement to the contrary) the allocative decision solely in one of the litigants. The other two classes concern a new type of rule, "dual chooser" rules, that allow either party to veto the transfer of an entitlement. Dualchooser rules are more than a theoretical curiosity both because they exist in our current law and because at times they produce systematically greater allocative efficiency than either type of single-chooser rule. Two heads are sometimes better than one.A central result of the paper is that in choosing among different liability rules allocative concerns can be decoupled from distributive concerns. There exist an infinite number of liability rules which produce each of the four basic allocations, but every rule within a particular class divides differently between the litigants the expected value of the allocation. To successfully decouple, courts should at times impose "call option," "put option," "Pay or be Paid," and "Pay or Pay" rules.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Did you know? Each page is provided with a technical contact, in case something is not right with the supplied information. See under "publisher info".