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Costly Enforcement of Property Rights and the Coase Theorem

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Author Info
Robson, Alexander R. W.
Skaperdas, Stergios

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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 ine.ciencies, 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 CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 762.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_762

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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

References listed on IDEAS
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  19. 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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Cited by:
(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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