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Property rights and investments: An evolutionary approach

Listed author(s):
  • Andreozzi, Luciano

When contracts are not enforceable, or property rights are not clearly defined, individuals may lack an incentive to carry out costly investments even when they are socially efficient. Some recent contributions such as Ellingsen and Robles (2002) prove that this problem may be less dramatic than standard economic models would suggest. They propose evolutionary models in which only efficient equilibria can be (stochastically) stable. In this paper we show that these results are not robust with respect to the introduction of individual heterogeneity. When individuals have different cost functions, stochastically stable states may be inefficient, even when they induce a positive (suboptimal) level of investment.

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File URL: http://www.sciencedirect.com/science/article/pii/S0899825611001126
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 74 (2012)
Issue (Month): 1 ()
Pages: 1-11

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Handle: RePEc:eee:gamebe:v:74:y:2012:i:1:p:1-11
DOI: 10.1016/j.geb.2011.07.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  10. Noldeke Georg & Samuelson Larry, 1993. "An Evolutionary Analysis of Backward and Forward Induction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 425-454, July.
  11. Binmore, Ken & Samuelson, Larry & Young, Peyton, 2003. "Equilibrium selection in bargaining models," Games and Economic Behavior, Elsevier, vol. 45(2), pages 296-328, November.
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