This award funds work on two distinct projects. The Cose Theorem instructs that the allocation of property rights is irrelevant for economic outcomes; as long as all parties affected by a decision can engage in efficient bargaining, the allocation of property rights will not matter. While a sueful benchmark, economists have long recognized that in many circumstances such bargaining is not possible. The first project focuses on one reason: inefficient bargaining due to asymmetric information. Put simply, when bargaining is imperfect because the parties do not have the same information, the status quo position of the parties may matter for the final agreements reached. This research works to analyse how property rights should be be distribued to maximize economic welfare under these circumstances. The project expands on previous results by investigating issues such as the nature of second best property rights when efficiency cannot be achieved, the benefits of options-to-own over simple property rights, the effects of alternative bargaining procedures, and optimal property rights in dynamic settings. This would may improve our understanding of issues as diverse as the optimal assignment of of intellectual property rights, the benefits of liability rules versus property rules in law, the efficienciy of alternative mthods of allocating spectrum, and the organization of productive partnerships. The intellectual merit of the project is that it seeks to expand our understanding of how the proper allocation of property rights can increase effciency by facilitating trade. The broader impacts are that the allocation of property rights plays an important role in numerous practical economic progblems.
The second project examines the nature of an optimal horizontal merger policy, one fo the central pillars of antitrust policy. The project characterizes an optimal dynamic merger policy in a setting with stochastically arriving merger possibilities and ex ante uncertain levels of synergies in which the firms decide each period which mergers to propose to the antitrust authoirty. It identifies conditions in which this difficult issue has a strikingly simple resolution: an antitrust authority who wants to maximize consumer welfare can accomplish the objective by using a completely myopic merger review policy; that is, one that approves a merger today if and only if it deos not lower consumer surplus given the current market structure. New work on this project includes the relaxation of an important assumption, that the set of firms involved in one possible merger does not overlap with those in any other possible mergers. The broader impacts of this project include developing better-informed antitrust policies.
