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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
DOI: 10.1016/j.jpubeco.2012.11.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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