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Free keywords:
Coase theorem, absolute vs. relative right, bargaining, efficiency, distribution, fairness
JEL:
C91 - Laboratory, Individual Behavior
JEL:
D01 - Microeconomic Behavior: Underlying Principles
JEL:
D02 - Institutions: Design, Formation, Operations, and Impact
JEL:
D03 - Behavioral Microeconomics: Underlying Principles
JEL:
D47 - Market Design
JEL:
D61 - Allocative Efficiency; Cost–Benefit Analysis
JEL:
K11 - Property Law
Abstract:
The Coase theorem posits: If [1] property rights are perfect, [2] contracts are enforceable, [3] preferences are common knowledge, and [4] transaction costs are zero, then the initial allocation of property rights only matters for distribution, not for efficiency. In this paper we claim that condition [1] can be dropped and show experimentally that this is also empirically true. This also holds when we frame taking as “stealing”, and when the initial possessor has to work for the good.
