The John M. Olin Center

Paper Abstract

858. Oren Bar-Gill & Nicola Persico, Exchange Efficiency with Weak Ownership Rights, 03/2016; forthcoming in American Economic Journal: Microeconomics.

Abstract: We show that efficient exchange obtains independently of the degree to which a legal system protects the rights of owners. We study a number of different legal rules, including property rules (strong protection), liability rules (any party can take the owner’s asset but must pay a legally-determined compensation), and even rules that protect the owner’s interests very weakly (liability rules with a very low compensation level). Efficiency is obtained as long as the degree of protection provided by law and by the bargaining protocol is not "too" inversely correlated with a party’s valuation of the asset.

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