The Property-Contract Balance

Giuseppe Dari-Mattiacci, Carmine Guerriero and Zhenxing Huang

Journal of Institutional and Theoretical Economics (JITE), 2016, vol. 172, issue 1, 40-64

Abstract: We identify a key trade-off between protecting property rights and enhancing reliance on contracts. For instance, when a dishonest intermediary transfers a good to an innocent buyer without the owner's consent, should the buyer or the owner retain the good? We show that the optimal rule maximizes the agents' valuation of the good rather than their incentives to protect property and inquire about title. Furthermore, enhancing reliance on contracts is more appealing in countries where fewer intermediaries are honest and law enforcement is more efficient. This is consistent with novel comparative-law data on the acquisition of ownership over movables.

JEL-codes: K11 L11 P14 Z10 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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DOI: 10.1628/093245613X14500948553956

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