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Property Rights and Liability Rules: The Ex Ante View of the Cathedral

50 Pages Posted: 20 Feb 2002 Last revised: 10 May 2009

Lucian A. Bebchuk

Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Date Written: December 1, 2001

Abstract

Beginning with Calabresi's and Melamed's seminal article, economic analysis of property rights and liability rules has been largely done from an ex post perspective, taking as given the presence of the parties involved and their payoffs. This paper analyzes how such allocation of entitlements affects ex ante investments and actions. Even when ex post bargaining is easy, the ex post allocation of entitlements, by affecting the distribution of ex post value, can have significant efficiency effects ex ante. By identifying the ex ante effects of alternative rules, the analysis provides a framework for determining allocations of entitlement that would perform best from the perspective of ex ante efficiency.

Keywords: externalities, property rights, liability rules, ex ante investments, regulation

JEL Classification: D62, K10, K11

Suggested Citation

Bebchuk, Lucian A., Property Rights and Liability Rules: The Ex Ante View of the Cathedral (December 1, 2001). Michigan Law Review, Vol. 100, pp. 601-639, 2001; Harvard Law and Economics Discussion Paper No. 347, 2001. Available at SSRN: https://ssrn.com/abstract=301283 or http://dx.doi.org/10.2139/ssrn.301283

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

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