Imperfect Property Rights
52 Pages Posted: 19 Oct 2009
Date Written: October 16, 2009
In theory, property rights allow markets to achieve Pareto optimal allocations. But the literature on contracting largely ignores what happens when property rights are imperfectly defined and enforced. Although some models include weak enforcement or poorly defined rights or "anticommons," this paper develops a general model that includes all of these possibilities. I find that combinations matter: Policy prescriptions to remedy individual imperfections are sometimes inappropriate under other conditions. For example, stronger penalties for violating rights can decrease Pareto efficiency, contrary to a common view. Also, collective rights organizations, such as patent pools, sometimes worsen problems of overlapping claims.
Keywords: property, markets, externalities, contract enforcement, regulation
JEL Classification: K11, K42, L14, L51
Suggested Citation: Suggested Citation