If property rights to consumption goods are insecure, the incentives to trade in a barter economy are reshaped. In a pure exchange economy, we examine the case where two contestable consumption goods are vital to two agents and initial endowments follow a binary distribution. In line with the existing literature, we examine in a two-stage game how the equilibrium security of claims to property is determined. We find that, in equilibrium, two different regimes emerge, depending on the exogenous preference and appropriationeffectiveness parameters: Peaceful coexistence and trade and appropriation,with the former regime strictly Pareto-dominating the latter regime.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
3260.
Find related papers by JEL classification: F10 - International Economics - - Trade - - - General C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
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