Market Correlation and Property Rights

Shin-Hwan Chiang () and Xiang Li

Journal of Institutional and Theoretical Economics (JITE), 2010, vol. 166, issue 3, 426-438

Abstract: This paper examines the origins of property rights in the presence of production uncertainty. Since stealing others' possessions is permitted under anarchy, the winner is able to enjoy the lion's share of total outputs produced by all parties, and this generates a diversification effect, since the random outputs are polled together. Taking this effect into account, we characterize the subgame-perfect equilibrium for our two-stage game. Specifically, the emergence of property rights is shown to depend on players' incentives to fight, variances, and market correlations. The model predicts that property rights are more likely to emerge when market correlations increase.

JEL-codes: D23 D81 D82 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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