Costly Enforcement of Property Rights and the Coase Theorem

Alex Robson () and Stergios Skaperdas

ANUCBE School of Economics Working Papers from Australian National University, College of Business and Economics, School of Economics

Abstract: We examine a setting in which property rights are initially ambiguously defined. Whether the parties go to court to remove the ambiguity or bargain and settle privately, they incur enforcement costs. When the parties bargain, a version of the Coase theorem holds. Despite the additional costs of going to court, other ex post inefficiencies, and the absence of incomplete information, however, going to court may be an equilibrium or ex ante Pareto-superior over settlement; this is especially true in dynamic settings whereby a court decision saves on future enforcement costs. When the parties do not negotiate and go to court the Coase theorem ceases to hold, and a simple rule for the initial assignment of rights maximizes net surplus.

JEL-codes: C70 K40 (search for similar items in EconPapers)
Date: 2005-06

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Related works:
Working Paper: Costly Enforcement of Property Rights and the Coase Theorem (2002)
Journal Article: Costly enforcement of property rights and the Coase theorem (2008)
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