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Coming to the Nuisance: Revisiting Spur in a Model of Location Choice

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  • Robert Innes
Abstract
Building on recent work of Pitchford and Snyder (PS, 2003), this article models effects of alternative property rights regimes on sequential location decisions of two players. A new resident decides whether to "come to the nuisance" by locating next to an existing business or to locate elsewhere where there are no negative externalities between occupants. Faced with a new resident, the existing business can relocate. Once situated, local residents bargain to address negative externalities. However, location decisions are non-contractible. In this setting--contrary to PS--the first best is achieved by allocating property rights to the first party, entitling the initial resident to full compensation for damages. This rule is consistent with the Spur Industries decision. Allocating property rights to second parties excessively encourages residents to "come to the nuisance," whereas stronger first-party rights (injunctive or exclusion) excessively deter nuisances from moving to areas less prone to external harm. (JEL K11, K32, D62, D23) The Author 2008. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Robert Innes, 2009. "Coming to the Nuisance: Revisiting Spur in a Model of Location Choice," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 286-310, October.
    • Handle: RePEc:oup:jleorg:v:25:y:2009:i:2:p:286-310
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    File URL: http://hdl.handle.net/10.1093/jleo/ewn007
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    Citations

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    Cited by:

    1. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    2. David Gilo & Ehud Guttel & Erez Yuval, 2013. "Negligence, Strict Liability, and Collective Action," The Journal of Legal Studies, University of Chicago Press, vol. 42(1), pages 69-82.

    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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