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Resale Markets and the Assignment of Property Rights

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  • Philippe Jehiel
  • Benny Moldovanu

Abstract

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.

Suggested Citation

  • Philippe Jehiel & Benny Moldovanu, 1999. "Resale Markets and the Assignment of Property Rights," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(4), pages 971-991.
    • Handle: RePEc:oup:restud:v:66:y:1999:i:4:p:971-991.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00116
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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