Allocation of Common Resources with Political Bargaining

This paper analyses the problem of the allocation of common resources within a situation of political bargaining. Using Zusman's cooperative bargaining framework the effects of property rights and policy tools (prices&quantities) on the efficiency of the allocation, are examined. It shows that the Coase theorem holds when political power is equally distributed and price is the policy tool of the decision maker. When aggregate quantity is the policy tool, the efficiency depends on the distribution of the property rights. Likewise, it demonstrates that when property rights are not well defined, the efficiency of the allocation process depends on both elasticity of demand and supply. Finally it proves that when property rights are not defined, using price as a policy tool results in a higher quantity allocation than in the situation when quantity is the policy tool.


Issue Date:
1995-12
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/232683
Total Pages:
45
Series Statement:
Working Paper
9509




 Record created 2017-04-01, last modified 2017-08-29

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