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Initially contestable property rights and Coase: evidence from the lab

Author

Listed:
  • Lana Friesen

    (School of Economics, University of Queensland, Brisbane, Australia)

  • Ian A. MacKenzie

    (School of Economics, University of Queensland, Brisbane, Australia)

  • Mai Phuong Nguyen

    (School of Economics, University of Queensland, Brisbane, Australia)

Abstract
This article investigates how the existence of initially contestable property rights affects the efficiency of the Coase theorem. We design a two-stage experiment that incorporates a stage where property rights are initially allocated to participants followed by a stage that allows bargaining between participants. In stage one, participants endogenously choose their effort (and thus the probability) to appropriate the property rights before entering an unstructured bargaining game. We find the presence of costly appropriation activity to obtain the property rights makes it significantly less likely that the efficient outcome is reached. We introduce bargaining costs and find that allowing for symmetric bargaining costs has no impact on the likelihood of the efficient outcome being reached, whereas asymmetric bargaining costs between outcomes substantially reduces the likelihood of reaching an efficient outcome.

Suggested Citation

  • Lana Friesen & Ian A. MacKenzie & Mai Phuong Nguyen, 2022. "Initially contestable property rights and Coase: evidence from the lab," Discussion Papers Series 656, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:656
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    File URL: https://economics.uq.edu.au/files/39811/656.pdf
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    References listed on IDEAS

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    Cited by:

    1. Aivazian, Varouj A. & Callen, Jeffrey L., 2023. "The Coase Theorem and the empty core: Inspecting the entrails after four decades," International Review of Law and Economics, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    Coasean bargaining; transaction costs; experiment; property rights; contest;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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