Law Commons^™

Solomonic Bargaining: Dividing A Legal Entitlement To Facilitate Coasean Trade, Ian Ayres, Eric Talley

Faculty Scholarship

It is a common argument in law and economics that divided ownership can create or exacerbate strategic behavior. For instance, when several persons own the land designated for a proposed stadium, individual sellers may "hold out" for a disproportionate share of the gains from trade. Alternatively, when building a public library would benefit multiple residents, individual buyers may "free ride" on the willingness of others to pay for its construction. Such transaction costs of collective action fall under a variety of analytic rubrics, including the "tragedy of the commons" and the theory of "public goods." Nonetheless, each example of market …