lecture 8.ppt - Econ 522 Economics of Law Dan Quint Fall...

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Econ 522 Economics of Law Dan Quint Fall 2019 Lecture 8
2 HW2 posted, due next Monday night (October 7) First midterm: next Thursday, October 10 Covers everything up to the end of property law Logistics
3 Can UW undergrads reallocate poker chips efficiently? (Cost me $162 to find out!) What happened? Last week, we “tested the Coase Theorem”
4 Take 1: Full Information (values on nametags) Our experiment… 26/28 = 93% 58 60 32 purple chip 2 purple chip 4 purple chip 4 6 purple chip 6 purple chip purple chip 8 purple chip purple chip red chip 8 purple chip purple chip 10 red chip purple chip 10 red chip 12 fraction of potential gains realized actual final allocation efficient allocation starting allocation purple chip
5 Take 2: Private Information (values hidden) Our experiment… 22/24 = 92% 46 48 24 purple chip 2 purple chip 3 purple chip 3 4 purple chip purple chip 4 purple chip purple chip 6 purple chip red chip 6 purple chip purple chip 8 red chip purple chip 8 purple chip red chip 10 fraction of potential gains realized actual final allocation efficient allocation starting allocation
6 Take 3: Uncertainty Die rolls: 5, 5, and 4 So valuations were 10, 10, 8 to sellers, and 15, 15, 12 to buyers (but they didn’t know that) Two of three chips sold $9 out of 14 surplus achieved = 64% Take 4: Asymmetric Information Die rolls: 1, 2, and 6 So valuations were 2, 4, 12 to sellers, and 3, 6, 18 to buyers Two “low-value” chips sold, “high-value” chip did not $3 out of 9 = 33% of surplus achieved, and one buyer “overpaid” Our experiment…
7 Coase seems to work pretty well with certainty, but uncertainty or asymmetric info can be problems Full info: 93% of gains achieved Private info: 92% of gains Uncertainty: 64% Asymmetric info: 33% Obviously a pretty idealized environment… Conclusion
8 Three interesting property law cases/stories
9 Three interesting property law cases/stories
10 Discussed what efficient property law system would look like Introduced dynamic games, sequential rationality, subgame-perfect equilibrium Talked about patents and copyright Before we get back to it… Last week…
11 (old exam question, question by Alex Tabarrok at Marginal Revolution blog) In Virginia, the common law has long held that if a neighbor’s tree encroaches on your yard you may cut the branches as they cross the property line, but any damage the tree does to your property is your problem. Your neighbor can even sue if your pruning kills the tree. In 2007, the Virginia Supreme Court overruled this 70-year- old precedent, making it your neighbor’s duty to prune or cut down the tree if it is a “nuisance.” Which is better: the new rule or the old? What would the Coase Theorem say about the two rules?

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