Conclusions
The results of the anticommons in the context of property do not strictly depend on the legal or physical nature of property fragmentation. Property fragmentation merely indicates the existence of multiple rights held by different individuals to control or veto a change in the use of their land.
As shown in our example, suboptimal final allocations of resources may be the consequence of fragmented decision rights, even when such fragmentation concerns a unitary physical asset. Even in the face of value-enhancing opportunities, multiple right holders may face incentives to employ their veto power to maximize the private return from the joint enterprise. The combined effect of the various agents’ strategies leads to an inefficient outcome.The outcome of this model of fragmented property is perhaps most easily understood if it is further recognized that each agent exerts a positive externality on the other agent. Hence, the above result is consistent with conventional wisdom, according to which in situations of positive externalities the use of some resource is less than optimal. These results were more extensively formalized by Schulz et al. (2002) and show that the severity of the deadweight losses from dysfunctional property fragmentation increases monotonically with the number of independent fragmented owners. The larger the number of individuals who can independently price an essential input for the land development project, the higher the equilibrium price that each of these individuals will demand for his/her own fragment. At the limit, as the number of fragmented owners approaches very large numbers (or infinity), complete abandonment of the land will result.
References
Buchanan, J. and Y.J. Yoon (2000), ‘Symmetric tragedies: commons and anticommons property’, Journal of Law and Economics 43 (1), April, pp.
1-13.Cheung, S.N.S. (1987), ‘Common property rights’, 1, in J. Eatwell, M. Milgate and P. Newman (eds), The New Palgrave: A Dictionary of Economics, London: Macmillan, 504-5.
Gordon, H.S. (1954), ‘The economic theory of a common-property resource: the fishery’, Journal of Political Economy, 62, 124-42.
Hardin, G. (1968), ‘The tragedy of the commons’, Science, 162, 1243-8.
Heller, M.A. (1998), ‘The tragedy of the anticommons: property in the transition from Marx to markets’, Harvard Law Review, 111, January, 621.
Heller, M.A. (1999), ‘The boundaries of private property’, Yale Law Journal, 108, 1163-223. Michelman, F.I. (1967), ‘Property, utility and fairness: comments on the ethical foundations of “just compensation” law’, Harvard Law Review, 80 (6), April, 1165-258.
Parisi, F. (2002a), ‘Entropy in property’, American Journal of Comparative Law, 50, 701-38. Parisi, F. (2002b), ‘Freedom of contract and the laws of entropy’, Supreme Court Economic Review, 10, 65-90.
Parisi, F., N. Schulz and B. Depoorter (2004), ‘Simultanous versus sequential anticommons’, European Journal of Law and Economics, 17 (March) (2), 175-90.
Posner, R.A. (1998), Economic Analysis of Law, 5th edn, New York: Aspen.
Schulz, N., F. Parisi and B. Depoorter (2002), ‘Fragmentation in property: towards a general model’, Journal of Institutional and Theoretical Economics, 158, December, 594-613.