Law Commons^™

Resolving Conflicts Over Scarce Resources: Private Versus Shared Ownership, W.C. Bunting

Marquette Law Review

This Article models private ownership as a conflict resolution mechanism and contends that for the Coase Theorem, as narrowly defined in this Article, to be consistent, private ownership must yield the Pareto- optimal use of scarce resources among all feasible conflict resolution mechanisms. Conflict over a scarce resource may be better resolved, however, by eliminating the possibility of private ownership and “forcing” disputing parties to share ownership of the contested resource. A corollary to the Coase Theorem is introduced which states: In the absence of transaction costs, the distribution of private and shared ownership is efficient. Further, assuming transaction costs …

A Coasean Experiment On Contract Presumptions, Stewart J. Schwab

Stewart J Schwab

Despite the theoretical importance of the Coase Theorem, scholars have given surprisingly little attention to verifying its predictions empirically. Supporters often accept the theorem as dogma, while armchair critics assail its assumptions. In an exciting series of recent articles, however, Elizabeth Hoffman and Matthew Spitzer have presented experimental evidence, as have others, that largely supports the Coasean prediction that bargainers will negotiate around inefficient property rights to reach a Pareto-optimal solution. The methodology has even gained sufficient attention to have its detractors. The existing experiments analyze the results of bargains when one side has the power to impose unilaterally one …

Remedies And The Psychology Of Ownership, Jeffrey J. Rachlinski, Forest Jourden

Jeffrey J. Rachlinski

No abstract provided.

Coasean Bargaining In Consumer Bankruptcy, Edward R. Morrison

Faculty Scholarship

During my first weeks as a graduate student in economics, a professor described the Coase Theorem as “nearly a tautology:” Assume a world in which bargaining is costless. If there are gains from trade, the Theorem tells us, the parties will trade. The initial assignment of property rights will not affect the final allocation because the parties will bargain (costlessly) to an efficient outcome. “How can that be a theorem?,” I remember thinking at the time.

Understanding "The Problem Of Social Cost", Enrico Baffi

enrico baffi

This paper examines the positions of Coase and Pigou in regard to the problem of external effects (externalities). Assessing their two most important works, it appears that Coase has a more relevant preference for an evaluation of total efficiency, while Pigou, with some exceptions, is convinced that it is almost always socially desirable to reach marginal efficiency through taxes or liability. It is interesting that the economist of Chicago, who has elaborated on the renowned theorem, thinks that is not desirable to reach efficiency at the margin every time, and that it is often preferable to evaluate the total, which …

A New Experiment On Rational Behavior, Myles R. Macdonald

CMC Senior Theses

Behavioral economics is widely recognized as a rising field in economics, one whose discoveries and implications are not yet completed or understood. At the same time, economic theory plays an enormous role in our governmental and legal system. In particular, the Coase Theorem and its implications have affected nearly every area in the field of law and economics. This paper proposes a experimental test of Coasean bargaining in situations using two competitive players whose payoffs depend on minimizing their costs of mitigating the externality. A rational player’s action can be predicted ahead of time, and the rationality of the game’s …

Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith

Faculty Scholarship

In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase’s purpose, but its limitations emerge when we apply Coase’s central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional …

Strategic Spillovers, Daniel B. Kelly

Journal Articles

The conventional problem with externalities is well known: Parties often generate harm as an unintended byproduct of using their property. This Article examines situations in which parties may generate harm purposely, in order to extract payments in exchange for desisting. Such “strategic spillovers” have received relatively little attention, but the problem is a perennial one. From the “livery stable scam” in Chicago to “pollution entrepreneurs” in China, parties may engage in externality-generating activities they otherwise would not have undertaken, or increase the level of harm given that they are engaging in such activities, to profit through bargaining or subsidies. This …

Remedies And The Psychology Of Ownership, Jeffrey J. Rachlinski, Forest Jourden

Cornell Law Faculty Publications

A Coasean Experiment On Contract Presumptions, Stewart J. Schwab

Cornell Law Faculty Publications

Despite the theoretical importance of the Coase Theorem, scholars have given surprisingly little attention to verifying its predictions empirically. Supporters often accept the theorem as dogma, while armchair critics assail its assumptions. In an exciting series of recent articles, however, Elizabeth Hoffman and Matthew Spitzer have presented experimental evidence, as have others, that largely supports the Coasean prediction that bargainers will negotiate around inefficient property rights to reach a Pareto-optimal solution. The methodology has even gained sufficient attention to have its detractors.

The existing experiments analyze the results of bargains when one side has the power to impose unilaterally one …