Bargaining around cost-benefit standards

Ehud Guttel, Shmuel Leshem*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


Injurers often purchase the property of potential victims to avoid liability or to comply with regulations. This paper shows that injurers subject to cost-benefit standards could profit from buying out victims even if they attach no value to the victims' property. Because buyouts allow injurers to take fewer precautions, a buyout of one victim produces a negative externality for the remaining victims. Injurers can consequently exploit victims, and thereby reduce social welfare, by adopting a "divide-and-conquer" strategy or by negotiating with victims sequentially. Perhaps surprisingly, buyouts may reduce social welfare and victims' joint profits even if victims make simultaneous or sequential take-it-or-leave-it buyout demands to the injurer.

Original languageAmerican English
Pages (from-to)55-67
Number of pages13
JournalJournal of Public Economics
StatePublished - Jul 2013


  • Cost-benefit standards
  • Divide and conquer
  • Negative externalities
  • Public goods


Dive into the research topics of 'Bargaining around cost-benefit standards'. Together they form a unique fingerprint.

Cite this