Reponse paper on Bounded Rationality and the Theory of Property
by Oren Bar-Gill and Nicola Persico
The paper analyzed theoretical justification for efficiency of property rule versus efficiency of liability rule under different conditions. Authors challenged the conventional justification, based on overcoming the label of allocative inefficiency of liability rule. They have shown that under assumptions of perfectly rational parties (with full knowledge and forseeablity of future), liability rule can lead to an efficient result. However, under conditions of bounded rationality,……….