On the Social Stability of Coalitional Property Rights Regimes

GU Working Paper 96-28

21 Pages Posted: 18 May 1998

See all articles by Roger Lagunoff

Roger Lagunoff

Georgetown University - Department of Economics

Gerhard Glomm

Indiana University Bloomington - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1996

Abstract

We present a model of coalitional property rights (CPR) regimes ? regimes in which ownership of a good is attributable to coalitions of various sizes. Specifically, for each good, we define a legal structure that specifies the legal coalitions of individuals that share a communal claim to that good. Generally, each legal coalition may use exclusionary rules to allocate its holdings internally. These rules allow eligible subcoalitions to recontract by expropriating some fraction of the legal coalition's endowment. We then ask: what types of CPR regimes are socially stable in the sense of having a nonempty core? We give conditions on the legal structure and the primitives of the economy that achieve social stability in this sense. We emphasize two cases of particular interest.

(I) Unanimity. Unanimity is required for a legal coalition to recontract against (block) the status quo. In this case, the core is nonempty under standard assumptions. Each agent's ability to veto an alternative allocation allows a partial characterization in terms of the economies that are privatized by dividing up the communal endowment among the members of each legal coalition. We show that in some economies collective vs. private ownership matters in terms of social stability.

(II) Exclusion. Many eligible subcoalitions can expropriate the legal coalition's entire endowment. An example is the collection of simple majorities. the presence of cycles can easily lead to social instability. We show that if endowment holdings are sufficiently "specialized" and each agent's "veto power" sufficiently large, then stability can be achieved despite the presence of cycles in some goods.

JEL Classification: D74

Suggested Citation

Lagunoff, Roger and Glomm, Gerhard, On the Social Stability of Coalitional Property Rights Regimes (September 1996). GU Working Paper 96-28, Available at SSRN: https://ssrn.com/abstract=75608 or http://dx.doi.org/10.2139/ssrn.75608

Roger Lagunoff (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-1510 (Phone)
202-687-6102 (Fax)

Gerhard Glomm

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-7256 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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