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How to Protect Entitlements: An Experiment

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  • Oren Bar-Gill
  • Christoph Engel

Abstract

We study the effects of legal protection on the likelihood of efficient trade. Fairness norms that affect the parties' willingness to pay (WTP) and willingness to accept (WTA) may depend on how strongly the entitlement is protected. We show that our participants can be divided into three groups corresponding to three fairness norms: negative types, whose WTP and WTA are decreasing in the strength of the legal remedy; positive types, whose WTP and WTA are increasing in the strength of the legal remedy; and flat types, whose WTP and WTA do not depend on the strength of the legal remedy. We find that type is role dependent such that a higher WTP and a lower WTA--the combination most conducive to efficient trade--is obtained with a weaker legal remedy.

Suggested Citation

  • Oren Bar-Gill & Christoph Engel, 2018. "How to Protect Entitlements: An Experiment," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 525-553.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/699547
    DOI: 10.1086/699547
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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