Working Paper: CEPR ID: DP1196
Authors: Philippe Jehiel; Benny Moldovanu
Abstract: An indivisible good is to be consumed by one of several agents. The consumption involves identity-dependent externalities to the non-consumers. Resale markets for such goods are analysed in various institutional settings with complete information, assuming the agents cannot commit to future actions. It is shown that the laissez-faire institution results in final outcomes that are welfare-equivalent irrespective of the initial structure of property rights. The final outcome need not be socially optimal, however. While the independence result is in the spirit of Coase, the inefficiency result shows that the independence and efficiency properties are logically unrelated.
Keywords: externalities; noncommitment; resale; coase theorem
JEL Codes: C78; D23; D61; D62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial property rights (P14) | final consumption (E20) |
| initial property rights (P14) | final outcomes (G33) |
| final outcomes (G33) | welfare-equivalence (D69) |
| final outcomes (G33) | social optimality (D61) |
| independence property (H13) | welfare-equivalence (D69) |
| inefficiency result (D61) | social optimality (D61) |