 Bargaining under Rules versus StandardsJason Scott Johnston The Journal of Law, Economics, and Organization, 1995, vol. 11, issue 2, 256-81 Abstract: The efficiency of two-party incomplete information sequential bargaining over an entitlement relating to external harm is analyzed under two alternative property rights regimes: definite entitlements, where a rule allocates the entitlement to one of the parties in an ex ante certain way; and contingent entitlements, where the assignment of the entitlement depends on the outcome of an ex post judicial balancing test that weighs the value of the activity against the external harm it generates. It is shown that a contingent entitlement may make credible a threat to take--cause harm without consent--that is not credible under a definite entitlement, and that such a credible taking threat may supplant strategic delay as a screening device. Such a threat may induce immediate ex post efficient agreement. However, such a result obtains as a Perfect Bayesian equilibrium only if the legal balancing process is imperfect in measuring and balancing harm against value. Copyright 1995 by Oxford University Press. Date: 1995 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:jleorg:v:11:y:1995:i:2:p:256-81 Ordering information: This journal article can be ordered from Access Statistics for this article The Journal of Law, Economics, and Organization is currently edited by Andrea Prat More articles in The Journal of Law, Economics, and Organization from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. |
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