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Allocation of Common Resources with Political Bargaining

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  • Eyal, Brill
  • Hochman, Eithan

Abstract

This paper analyses the problem of the allocation of common resources within a situation of political bargaining. Using Zusman's cooperative bargaining framework the effects of property rights and policy tools (prices&quantities) on the efficiency of the allocation, are examined. It shows that the Coase theorem holds when political power is equally distributed and price is the policy tool of the decision maker. When aggregate quantity is the policy tool, the efficiency depends on the distribution of the property rights. Likewise, it demonstrates that when property rights are not well defined, the efficiency of the allocation process depends on both elasticity of demand and supply. Finally it proves that when property rights are not defined, using price as a policy tool results in a higher quantity allocation than in the situation when quantity is the policy tool.

Suggested Citation

  • Eyal, Brill & Hochman, Eithan, 1995. "Allocation of Common Resources with Political Bargaining," Working Papers 232683, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    • Handle: RePEc:ags:huaewp:232683
    DOI: 10.22004/ag.econ.232683
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    File URL: https://ageconsearch.umn.edu/record/232683/files/hebrewuniv-workingpapers-9509.pdf
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    Keywords

    Political Economy;

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