Abstract
The Demsetz hypothesis states that secure claims to property arise when the value of creating those rights is sufficiently high. This paper examines the conditions under which this holds in an anarchy equilibrium in which players may allocate labor to production, to conflict, or to the public good of secure claims to property protection. In a simultaneous choice Nash equilibrium, no secure claims to property are created. However, if players play a sequential choice game in which secure claims to property protection occurs in the first stage, then the strategic benefit of reducing others’ subsequent conflict allocation causes secure claims to property to arise. Secure claims to property in a social contract are imperfect, but for sufficiently high productivity of resources, the social contract welfare dominates autocracy.
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We have benefited from comments by Jeff Church, Curtis Eaton, Herb Emery, Steven Holland, Elinor Ostrom, Joanne Roberts, three anonymous referees, and the editor, Amihai Glazer. All remaining errors are our own.
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Boyce, J.R., Bruner, D.M. Property rights out of anarchy? The Demsetz hypothesis in a game of conflict. Econ Gov 13, 95–120 (2012). https://doi.org/10.1007/s10101-012-0107-9
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DOI: https://doi.org/10.1007/s10101-012-0107-9