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Property Rules, Liability Rules, and Uncertainty About Property Rights


Stewart E. Sterk


Yeshiva University - Cardozo Law School


Michigan Law Review, Vol. 106, 2008
Cardozo Legal Studies Research Paper No. 205

Abstract:     
Clarity can be a considerable virtue in property rights. But even when property rights are defined clearly in the abstract, ascertaining the scope of those rights in concrete situations often entails significant cost. In some instances, the cost of acquiring information about the scope of property rights will exceed the social value of that information. In those circumstances, further search for information about the scope of rights is inefficient; the social harm avoided by further search does not justify the costs of the search.

Potential resource users, however, make decisions based on private costs and benefits, not social costs and benefits. Legal rules can create incentives to search for information even when the search would be inefficient. In particular, "property rule" protection often gives leverage to right holders disproportionate to the harm those right holders would suffer from intrusion on their rights. That leverage, in turn, gives potential resource users private incentives to expend time and money on search even when search will generate minimal social benefit. "Liability rule" protection, by contrast, limits incentives to conduct inefficient search for the scope of property rights.

Property doctrine reflects this insight in a number of contexts. Thus, high search costs can explain the unwillingness of courts to award injunctive relief in cases of ¿innocent¿ boundary encroachments, as well as the Supreme Court's recent limitations on the routine award of injunctive relief in patent and copyright cases.

Number of Pages in PDF File: 54

Keywords: property, information costs, uncertainty, remedies, injunctions

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Date posted: September 24, 2007 ; Last revised: September 28, 2011

Suggested Citation

Sterk, Stewart E., Property Rules, Liability Rules, and Uncertainty About Property Rights. Michigan Law Review, Vol. 106, 2008; Cardozo Legal Studies Research Paper No. 205. Available at SSRN: http://ssrn.com/abstract=1016168

Contact Information

Stewart E. Sterk (Contact Author)
Yeshiva University - Cardozo Law School ( email )
55 Fifth Ave.
New York, NY 10003
United States
212-790-0230 (Phone)
212-790-0205 (Fax)
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