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The Property-Contract Balance

Author

Listed:
  • Giuseppe Dari-Mattiacci
  • Carmine Guerriero
  • Zhenxing Huang

Abstract

We identify a key trade-off between protecting property rights and enhancing reliance on contracts. For instance, when a dishonest intermediary transfers a good to an innocent buyer without the owner's consent, should the buyer or the owner retain the good? We show that the optimal rule maximizes the agents' valuation of the good rather than their incentives to protect property and inquire about title. Furthermore, enhancing reliance on contracts is more appealing in countries where fewer intermediaries are honest and law enforcement is more efficient. This is consistent with novel comparative-law data on the acquisition of ownership over movables.

Suggested Citation

  • Giuseppe Dari-Mattiacci & Carmine Guerriero & Zhenxing Huang, 2016. "The Property-Contract Balance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 40-64, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201603)172:1_40:tpb_2.0.tx_2-1
    DOI: 10.1628/093245613X14500948553956
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    References listed on IDEAS

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    Cited by:

    1. Arruñada, Benito, 2017. "Property as sequential exchange: the forgotten limits of private contract," Journal of Institutional Economics, Cambridge University Press, vol. 13(4), pages 753-783, December.
    2. Christoph Engel & Urs Schweizer, 2016. "Beyond Privity 33rd International Seminar on the New Institutional Economics June 10-13, 2015, Edinburgh, United Kingdom," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 1-4, March.
    3. Murat C. Mungan, 2016. "The Property-Contract Balance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 70-74, March.

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    More about this item

    JEL classification:

    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Z10 - Other Special Topics - - Cultural Economics - - - General
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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