On the Choice Between Property Rules and Liability Rules
AbstractWhen parties can bargain with each other in an externality situation, it is frequently argued that liability rules are preferable to property rules. The case for liability rules is thought to be strongest when the parties behave strategically, when the collective authority responsible for maximizing social welfare has perfect information, and when lump-sum transfers are not available. It is shown here that liability rules are not generally preferable to property rules in these circumstances because of their limited ability to redistribute income between the parties.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0286.
Date of creation: Dec 1980
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Other versions of this item:
- Polinsky, A Mitchell, 1980. "On the Choice between Property Rules and Liability Rules," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 233-46, April.
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- Frech, H E, III, 1979. "The Extended Coase Theorem and Long Run Equilibrium: The Nonequivalence of Liability Rules and Property Rights," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 254-68, April.
- Thomas J. Miceli, 2011. "The Use of Economics for Understanding Law: An Economist's View of the Cathedral," Working papers 2011-25, University of Connecticut, Department of Economics.
- Jongwook Kim & Joseph T. Mahoney, 2002. "Resource-based and property rights perspectives on value creation: the case of oil field unitization," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 225-245.
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