Skip to main content
Article thumbnail
Location of Repository

Consent and Exchange

By Oren Bar-Gill and Lucian Arye Bebchuk

Abstract

In some exceptional circumstances, a restitution rule entitles parties that unilaterally confer a benefit on another party to recover the estimated value of the benefit. Usually, however, the law applies a mutual consent rule under which providers of a benefit cannot obtain any recovery without the beneficiary’s consent. We provide an efficiency rationale for the law’s general preference for mutual consent over restitution. Even under the assumption that court errors in estimating buyers’ benefits would be unbiased, a restitution rule would have significant adverse ex ante effects. Because the rule would make it possible for some low-quality sellers to extract value from buyers, it would encourage inefficient market entry by low-quality sellers and discourage efficient market entry by some or all potential buyers. Similar adverse effects would arise from any pricing rule that provides buyers or sellers with call or put options to force an exchange at a judicially determined price.

DOI identifier: 10.1086/605568
OAI identifier: oai:RePEc:ucp:jlstud:doi:10.1086/605568
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.jstor.org/stable/pd... (external link)
  • http://www.jstor.org/stable/fu... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.