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Strategic Manipulation of Property Rights in Coasean Bargaining
Wolfgang Buchholz and Christian Haslbeck
Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte Staatswissenschaft
Vol. 153, No. 4 (December 1997), pp. 630-640
Published by: Mohr Siebeck GmbH & Co. KG
Stable URL: http://www.jstor.org/stable/40752019
Page Count: 11
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In a model of Coasean bargaining over externalities it is described how agents can manipulate their opponent's reservation utility by strategic actions at a pre-bargaining stage, such as the choice of a pollution technology. This may imply a misallocation of resources, and opening up trade possibilities will not necessarily lead to a Pareto improvement. This problem is specific to bargaining over externalities and will never occur in the exchange of private goods. It is concluded that the government has to supplement liability rules by additional restrictions on the agents' rights.
Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte Staatswissenschaft © 1997 Mohr Siebeck GmbH & Co. KG