How to Protect Entitlements: An Experiment

Oren Bar-Gill and Christoph Engel

Journal of Law and Economics, 2018, vol. 61, issue 3, 525 - 553

Abstract: We study the effects of legal protection on the likelihood of efficient trade. Fairness norms that affect the parties' willingness to pay (WTP) and willingness to accept (WTA) may depend on how strongly the entitlement is protected. We show that our participants can be divided into three groups corresponding to three fairness norms: negative types, whose WTP and WTA are decreasing in the strength of the legal remedy; positive types, whose WTP and WTA are increasing in the strength of the legal remedy; and flat types, whose WTP and WTA do not depend on the strength of the legal remedy. We find that type is role dependent such that a higher WTP and a lower WTA--the combination most conducive to efficient trade--is obtained with a weaker legal remedy.

Date: 2018
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Working Paper: How to Protect Entitlements: An Experiment (2017)
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