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Caps on Coasean Transfers

We investigate the efficiency of Coasean bargaining when transfers between agents are capped. We model a two-stage Coasean environment where, in the first stage, property rights are costly to attribute. After the attribution stage agents voluntarily exchange over the level of harm. If property rights are attributed via an all-pay auction, then the introduction of a cap is Pareto improving. Using a Tullock contest we find a cap is Pareto inferior, but may increase Kaldor-Hicks efficiency. Applications include the analysis of tort law.

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File URL: http://www.uq.edu.au/economics/abstract/485.pdf
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Paper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 485.

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Date of creation: 30 Aug 2013
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Handle: RePEc:qld:uq2004:485
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  1. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1993. "Rigging the Lobbying Process: An Application of the All-Pay Auction," American Economic Review, American Economic Association, vol. 83(1), pages 289-94, March.
  2. Luca Anderlini & Leonardo Felli, 2000. "Transaction costs and the robustness of the Coase Theorem," LSE Research Online Documents on Economics 3591, London School of Economics and Political Science, LSE Library.
  3. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  4. Alex Robson & Stergios Skaperdas, 2005. "Costly Enforcement of Property Rights and the Coase Theorem," ANU Working Papers in Economics and Econometrics 2005-455, Australian National University, College of Business and Economics, School of Economics.
  5. Shanley, Michael G, 1991. "The Distribution of Posttrial Adjustments to Jury Awards," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 463-81, June.
  6. Michael R. Baye & Dan Kovenock & Casper G. de Vries, 2000. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," CIG Working Papers FS IV 00-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  7. Marco Faravelli & Luca Stanca, 2010. "When Less is More: Rationing and Rent Dissipation in Stochastic Contests," Working Papers 197, University of Milano-Bicocca, Department of Economics, revised Sep 2010.
  8. Daniel P. Kessler, 2011. "Evaluating the Medical Malpractice System and Options for Reform," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 93-110, Spring.
  9. Kovenock, D. & de Vries, C.G., 1995. "The All-Pay Auction with Complete Information," UFAE and IAE Working Papers 311.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  10. Tullock, Gordon, 1975. "On the Efficient Organization of Trials," Kyklos, Wiley Blackwell, vol. 28(4), pages 745-62.
  11. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 709-722, Winter.
  12. Fang, Hanming, 2002. " Lottery versus All-Pay Auction Models of Lobbying," Public Choice, Springer, vol. 112(3-4), pages 351-71, September.
  13. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, March.
  14. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
  15. Alcalde, José & Dahm, Matthias, 2010. "Rent seeking and rent dissipation: A neutrality result," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 1-7, February.
  16. MacKenzie, Ian A. & Ohndorf, Markus, 2013. "Restricted Coasean bargaining," Journal of Public Economics, Elsevier, vol. 97(C), pages 296-307.
  17. Yeon-Koo Che & Ian Gale, 1998. "Caps on Political Lobbying," Microeconomics 9809003, EconWPA.
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