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  • Property Rules vs. Liability Rules

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    leiliu
    13 views7 pages
    This document discusses different rules for protecting property rights and interests when they conflict: - Property rules require consent of the owner for transfer and value is decided by market transactions. - Liability rules do not require owner consent for transfer, with value determined by courts. - Inalienability rules do not allow any transfer. It argues the most efficient rule depends on whether transaction costs of market allocation or litigation costs are lower in a given situation. Property rules are inefficient when transaction costs for negotiating transfers are high.

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    property rules

    Original Title

    Rules

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    This document discusses different rules for protecting property rights and interests when they conflict: - Property rules require consent of the owner for transfer and value is decided by market transactions. - Liability rules do not require owner consent for transfer, with value determined by courts. - Inalienability rules do not allow any transfer. It argues the most efficient rule depends on whether transaction costs of market allocation or litigation costs are lower in a given situation. Property rules are inefficient when transaction costs for negotiating transfers are high.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    13 views7 pages

    Property Rules vs. Liability Rules

    Uploaded by

    leiliu
    This document discusses different rules for protecting property rights and interests when they conflict: - Property rules require consent of the owner for transfer and value is decided by market transactions. - Liability rules do not require owner consent for transfer, with value determined by courts. - Inalienability rules do not allow any transfer. It argues the most efficient rule depends on whether transaction costs of market allocation or litigation costs are lower in a given situation. Property rules are inefficient when transaction costs for negotiating transfers are high.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    of 7

    Property Rules vs.

    Liability
    Rules
    Interests of property owners may
    conflict
    E.g., cement factory and neighbors:
    Right to clean air
    right to pollute/manufacture
    Who has the right?
    How should it be protected?
    Property rule
    Entitlement rule
    Inalienability rule
    Property Rule
    Consent of owner required for transfer
    Home or land ownership
    Sale
    Rental
    Injunction against nuisance or trespass
    Personal property watch, car
    Sale
    Rental
    Theft punishable by criminal law
    Value of right decided in market
    transaction
    Liability Rule
    Consent of owner not required for
    transfer
    Eminent domain
    Boomer v. Atlantic Cement
    Damage to car in accident
    Value determined by courts/legal
    system
    Inalienability Rule
    No transfer permitted
    Selling self into slavery
    Selling organs
    Selling babies
    What is the most efficient rule?
    Property rule where cost of allocating
    rights by market transactions is low

    Liability rule where cost of allocating


    rights by litigation is low
    Property rule is inefficient where
    transaction costs are high
    Group of farmers own land and neighbors
    want to purchase it for a park

    Go to example

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