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On the Choice Between Property Rules and Liability Rules


  • A. Mitchell Polinsky


When parties can bargain with each other in an externality situation, it is frequently argued that liability rules are preferable to property rules. The case for liability rules is thought to be strongest when the parties behave strategically, when the collective authority responsible for maximizing social welfare has perfect information, and when lump-sum transfers are not available. It is shown here that liability rules are not generally preferable to property rules in these circumstances because of their limited ability to redistribute income between the parties.

Suggested Citation

  • A. Mitchell Polinsky, 1978. "On the Choice Between Property Rules and Liability Rules," NBER Working Papers 0286, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0286
    Note: LE

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    References listed on IDEAS

    1. Frech, H E, III, 1979. "The Extended Coase Theorem and Long Run Equilibrium: The Nonequivalence of Liability Rules and Property Rights," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 254-268, April.
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    Cited by:

    1. Thomas Miceli, 2014. "The color of law: an economic theory of legal boundaries," European Journal of Law and Economics, Springer, vol. 38(2), pages 185-209, October.
    2. Jongwook Kim & Joseph T. Mahoney, 2002. "Resource-based and property rights perspectives on value creation: the case of oil field unitization," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 225-245.
    3. Thomas J. Miceli, 2011. "The Use of Economics for Understanding Law: An Economist's View of the Cathedral," Working papers 2011-25, University of Connecticut, Department of Economics.
    4. de Vries, J. Pierre & Sieh, Kaleb A., 2012. "Reception-oriented radio rights: Increasing the value of wireless by explicitly defining and delegating radio operating rights," Telecommunications Policy, Elsevier, vol. 36(7), pages 522-530.

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