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- Title
RENEGOTIATION AND THE ALLOCATION OF PROPERTY RIGHTS.
- Authors
Natale, Piergiovanna
- Abstract
Researchers S.J. Grossman and O. Hart showed that when "ex post" bargaining is prohibitively costly, the optimal allocation of property rights depends on the probability distribution of the parties' payoffs. Efficiency is realized by assigning property rights to the party whose payoff exhibits a relatively high "dispersion." But, if the variation in both the payoffs is large, each party should be given a veto power over the respective trading decision. When renegotiation is possible, the allocation of rights must set the benefits of a post flexibility against expected bargaining cost: the consequent ranking of regimes may be the reverse of that yielded by the Grossman and Hart assumption. In P. Natale's work it is shown that the Grossman and Hart proposition also fails under other reasonable generalizations of theft model. The authors provide a detailed justification to prove the fact on the failure of the preposition by Grossman and Hart through the medium of the article.
- Subjects
DISTRIBUTION (Probability theory); PROPERTY rights; PRICING; RENEGOTIATION; PROBABILITY theory; SURPLUS (Economics); EXECUTIVE power; AMNESTY; POLITICAL science
- Publication
Bulletin of Economic Research, 1992, Vol 44, Issue 3, p241
- ISSN
0307-3378
- Publication type
Article
- DOI
10.1111/j.1467-8586.1992.tb00546.x