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Tuesday, November 15, 2005

Strahilevitz on the Right to Exclude

Lior Strahilevitz (University of Chicago Law School) has posted Information Asymmetries and the Rights to Exclude on SSRN.  We covered a part of this article in my Property Theory seminar last week as part of a unit on the right to exclude.  Highly recommended!  Here is the abstract:

This article addresses a central question in property theory: In a world where an owner can exercise the right to exclude third parties from his resource in any of several ways, what causes him to adopt a particular exclusionary strategy?

Orthodox property scholarship has focused a great deal of attention on those exclusion rights that arise under trespass law. This paper suggests that much can be gained from thinking about exclusion with a bigger tent approach, one that is sensitive to the ways in which non-trespass-based exclusion rights substitute for in rem, trespass-based rights. Non-trespass-based exclusion rights include exclusionary vibes, which are communicative signals that make undesirable third parties feel unwelcome, as well as exclusionary amenities, which impose a disproportionate tax on the undesirable by bundling permission to use a resource with an obligation to pay for a separate, polarizing resource.

It turns out that information asymmetries often drive owners' decisions about what exclusion strategies to adopt. Where third parties seeking to use property possess private information about their own preferences, behaviors, and intentions, and the owner cannot discover this private information at a low cost, the owner is likely to delegate the exclusion function to the would-be entrants by employing non-trespass-based exclusion strategies. By contrast, where there is little private information involved, or private information can be discovered by the owner at a low cost, the owner is more likely to employ trespass-based exclusion rights.

This relationship between information asymmetries and the choice of exclusion strategies suggests new possibilities for creative government intervention in those settings where particular exclusion strategies conflict with public policy interests. It is well understood that the government can impose outright prohibitions, proscribing some forms of exclusion and permitting other forms. This is the strategy the government has adopted in the housing discrimination arena. Alternatively, the government can adopt subtler but equally effective strategies that regulate access to private information as a means of altering owners' incentives to exclude. Megan's Law is the most prominent and far-reaching example of the subtle approach, although many aspects of information privacy law affect owners' incentives in much the same way. In short, by rendering private information public or public information private, the state can alter, sometimes radically, the mix of exclusion strategies that resource owners employ.

Ben Barros

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