Journal Article

Resale Markets and the Assignment of Property Rights

Philippe Jehiel and Benny Moldovanu

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 4, pages 971-991
Published in print October 1999 | ISSN: 0034-6527
Published online October 1999 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00116
Resale Markets and the Assignment of Property Rights

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The consumption of an indivisible good causes identity-dependent externalities to non-consumers. We analyse resale markets where the current owner designs the trading procedure, but cannot commit to future actions. We ask the following questions: (1) Does the identity of the initial owner matter for the determination of the final consumer? (2) Is the outcome always efficient? The major conclusion of our paper is that the irrelevance of the initial structure of property rights arises in resale processes even if there are transaction costs that hinder efficiency. This result complements the Coasian view where the irrelevance of the assignment of property rights is a consequence of efficiency.

Journal Article.  0 words. 

Subjects: Economics

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