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Enforcement of Property Rights in a Barter Economy

By Magnus Hoffmann

Abstract

If property rights to consumption goods are insecure, the incentives to trade in a barter economy are reshaped. In a pure exchange economy, we examine the case where two contestable consumption goods are vital to two agents and initial endowments follow a binary distribution. In line with the existing literature, we examine in a two-stage game how the equilibrium security of claims to property is determined. We find that, in equilibrium, two different regimes emerge, depending on the exogenous preference and appropriationeffectiveness parameters: Peaceful coexistence and trade and appropriation,with the former regime strictly Pareto-dominating the latter regime.

Topics: F10 - General, C72 - Noncooperative Games, D51 - Exchange and Production Economies, D74 - Conflict; Conflict Resolution; Alliances
Year: 2006
DOI identifier: 10.1007/s00355-009-0395-3
OAI identifier: oai:mpra.ub.uni-muenchen.de:6181

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