Initially contestable property rights and Coase: evidence from the lab

Lana Friesen, Ian MacKenzie and Mai Phuong Nguyen
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Mai Phuong Nguyen: School of Economics, University of Queensland, Brisbane, Australia

No 656, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This article investigates how the existence of initially contestable property rights affects the efficiency of the Coase theorem. We design a two-stage experiment that incorporates a stage where property rights are initially allocated to participants followed by a stage that allows bargaining between participants. In stage one, participants endogenously choose their effort (and thus the probability) to appropriate the property rights before entering an unstructured bargaining game. We find the presence of costly appropriation activity to obtain the property rights makes it significantly less likely that the efficient outcome is reached. We introduce bargaining costs and find that allowing for symmetric bargaining costs has no impact on the likelihood of the efficient outcome being reached, whereas asymmetric bargaining costs between outcomes substantially reduces the likelihood of reaching an efficient outcome.

Keywords: Coasean bargaining; transaction costs; experiment; property rights; contest (search for similar items in EconPapers)
JEL-codes: C92 Q52 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-env, nep-exp, nep-gth and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Initially contestable property rights and Coase: Evidence from the lab (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:656

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