Enforcement of Property Rights in a Barter Economy

Hoffmann, Magnus (2006): Enforcement of Property Rights in a Barter Economy.

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.

• Item Type: MPRA Paper
• Institution: Johannes-Gutenberg University
• Language: English
• Keywords: Barter Exchange; Contests; Security of Property Rights
• Subjects: F - International Economics > F1 - Trade > F10 - General; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions

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