Property Rights and Incomplete Contracts: Dealing with Nuisance

ANU WP in Economics and Econometrics 308

Posted: 11 Sep 1996

See all articles by Rohan Pitchford

Rohan Pitchford

University of Sydney Business School

Christopher M. Snyder

Dartmouth College - Department of Economics; National Bureau of Economic Research

Date Written: August 8, 1996

Abstract

A model of externalities with sequential location choice is developed. The first mover decides on location before it knows the identity of the second mover. Joint location leads to a negative externality. The court, having limited information, allocates property rights over the externality based on the timing of location. Sufficient conditions are presented supporting the "coming to the nuisance" doctrine. This doctrine is not always supported: we characterize cases where greater social surplus may be generated by giving property rights to the second mover. A sufficient condition is presented guaranteeing optimality for any property rights allocation. It is also demonstrated that allocating property rights on the basis of stand-alone benefits does not guarantee efficiency.

JEL Classification: K11, D23, C78, H23

Suggested Citation

Pitchford, Rohan and Snyder, Christopher M., Property Rights and Incomplete Contracts: Dealing with Nuisance (August 8, 1996). ANU WP in Economics and Econometrics 308, Available at SSRN: https://ssrn.com/abstract=4206

Rohan Pitchford (Contact Author)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Christopher M. Snyder

Dartmouth College - Department of Economics ( email )

301 Rockefeller Hall
Hanover, NH 03755
United States
(603) 646-0642 (Phone)
(603) 646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~csnyder/

National Bureau of Economic Research ( email )

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Cambridge, MA 02138
United States

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