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Restricted Coasean bargaining

  • MacKenzie, Ian A.
  • Ohndorf, Markus

We investigate the efficiency of Coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes. When property rights are costly to (defend) appropriate, we find that bargaining restrictions may be Pareto superior to unconstrained voluntary exchange. Under cost uncertainty over the harmful activity, we show that an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions. For an all-pay auction, we find conditions where precluding bargaining is always ex ante preferable to unrestricted bargaining. For cases where the restrictions are contested, we show conditions for the continuing existence of welfare improvements.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 97 (2013)
Issue (Month): C ()
Pages: 296-307

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Handle: RePEc:eee:pubeco:v:97:y:2013:i:c:p:296-307
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  1. Anderlini Luca & Felli Leonardo & Postlewaite Andrew, 2011. "Should Courts Always Enforce What Contracting Parties Write?," Review of Law & Economics, De Gruyter, vol. 7(1), pages 14-28, February.
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  8. Shigehiro Serizawa & John A. Weymark, 2002. "Efficient Strategy-Proof Exchange and Minimum Consumption Guarantees," Vanderbilt University Department of Economics Working Papers 0216, Vanderbilt University Department of Economics, revised Aug 2002.
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