Document Type
Article
Publication Date
2006
ISSN
1555-5879
Publisher
De Gruyter Publishing House
Language
en-US
Abstract
In recent years, new articles presenting rigorous analyses of bargaining incentives have overturned some of the fundamental claims made by Calabresi and Melamed in their seminal article on property rules and liability rules published in 1972. In particular, the proposition that property rules are socially preferable to liability rules when transaction costs are low appears to be either no longer valid or severely weakened under the new analyses. This paper reexamines the property rule versus liability rule question in light of the contributions of the recent bargaining theory literature. In contrast to this literature, I find that the fundamental propositions of Calabresi-Melamed remain valid, and I extend the framework to provide a more detailed positive economic theory of common law rules. The key contribution of this paper is pointing out the importance of subjective valuations in the analysis of property and liability rules. This allows for a synthesis of Calabresi-Melamed and the bargaining theory literature within an expanded framework.
Recommended Citation
Keith N. Hylton,
Property Rules and Liability Rules, Once Again
,
in
2
Review of Law & Economics
137
(2006).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/731
Working paper available on SSRN
Comments
Updated with published version of paper on 9/24/22
Working paper available on SSRN