Imperfect Property Rights

James E. Bessen

Boston University School of Law Working Paper 09-46

Abstract

In theory, property rights allow markets to achieve Pareto optimal allocations. But the literature on contracting largely ignores what happens when property rights are imperfectly defined and enforced. Although some models include weak enforcement or poorly defined rights or "anticommons," this paper develops a general model that includes all of these possibilities. I find that combinations matter: policy prescriptions to remedy individual imperfections are sometimes inappropriate under other conditions. For example, stronger penalties for violating rights can decrease Pareto efficiency, contrary to a common view. Also, collective rights organizations, such as patent pools, sometimes worsen problems of overlapping claims.

Keywords: property, markets, externalities, contract enforcement, regulation

JEL Classifications: K11, K42, L14, L51

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James E. Bessen Contact Information
jbessen@bu.edu

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