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Exchange Efficiency with Weak Ownership Rights †

Exchange Efficiency with Weak Ownership Rights † Abstract We show that efficient exchange obtains independently of the degree to which a legal system protects the rights of owners. We study a number of different legal rules, including property rules (strong protection), liability rules (any party can take the owner's asset but must pay a legally determined compensation), and even rules that protect the owner's interests very weakly (liability rules with a very low compensation level). Efficiency is obtained as long as the degree of protection provided by law and by the bargaining protocol is not “too” inversely correlated with a party's valuation of the asset. (JEL D21, D51, K11, 034, P14 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Exchange Efficiency with Weak Ownership Rights †

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Publisher
American Economic Association
Copyright
Copyright © 2016 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.20140232
Publisher site
See Article on Publisher Site

Abstract

Abstract We show that efficient exchange obtains independently of the degree to which a legal system protects the rights of owners. We study a number of different legal rules, including property rules (strong protection), liability rules (any party can take the owner's asset but must pay a legally determined compensation), and even rules that protect the owner's interests very weakly (liability rules with a very low compensation level). Efficiency is obtained as long as the degree of protection provided by law and by the bargaining protocol is not “too” inversely correlated with a party's valuation of the asset. (JEL D21, D51, K11, 034, P14 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2016

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