# lecture 7.ppt - Econ 522 Economics of Law Dan Quint Fall...

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Econ 522 Economics of Law Dan Quint Fall 2019 Lecture 7
What things can be privately owned? Last time, we talked about how an efficient property law system would be designed
What can owners do with their property?
How are property rights established?
What remedies are given?
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3 Players anticipate that later players will be rational… …which can create an advantage to moving first (like in battle of the sexes), or moving second (like in scissors-paper-rock) Key assumption: common knowledge of rationality Everyone’s rational, everyone knows that, everyone knows that everyone knows that, etc. (We’re also assuming everyone knows everyone else’s payoffs – wouldn’t work if player 1 didn’t know whether player 2 preferred being together at baseball game to being alone at opera) And we defined “sequential rationality” in dynamic games
4 Next up: some applications of property law But first… Next up
5 An experiment on “Coasian bargaining”
6 Round 1 (full information) Ten people, five of them have a poker chip to start Each person is given a personal value for a poker chip At the end of the round, that’s how much you can trade in a chip for Purple chip is worth that number, red chip is worth 2 x your number So if your number is 6 and you end up with a purple chip, I’ll give you \$6 for it; if you end up with a red chip, I’ll give you \$12 for it Each person can only sell back one chip Your number is on your nametag (common knowledge) Experiment: Coasian bargaining
7 Round 2 ( private information ) Ten people, five of them have a poker chip to start Each person is given a personal value for a poker chip At the end of the round, that’s how much you can trade in a chip for Purple chip is worth that number, red chip is worth 2 x your number So if your number is 6 and you end up with a purple chip, I’ll give you \$6 for it; if you end up with a red chip, I’ll give you \$12 for it Each person can only sell back one chip Only you know your number Experiment: Coasian bargaining
8 Round 3 (uncertainty) Six people, three poker chips Value of each chip is determined by a die roll If seller keeps the chip, it’s worth 2 x roll of the die