Bargaining Under Rules Versus Standards

Abstract

The efficiency of two-party incomplete information sequential bargaining over an entitlement relating to external harm is analyzed under two alternative property rights regimes: definite entitlements, where a rule allocates the entitlement to one of the parties in an ex ante certain way; and contingent entitlements, where the assignment of the entitlement depends on the outcome of an ex post judicial balancing test that weighs the value of the activity against the external harm it generates. It is shown that a contingent entitlement may make credible a threat to take-cause harm without consent-that is not credible under a definite entitlement, and that such a credible taking threat may supplant strategic delay as a screening device. Such a threat may induce immediate ex post efficient agreement. However, such a result obtains as a Perfect Bayesian Equilibrium only if the legal balancing process is imperfect in measuing and balancing harm against value.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 68 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.