10.2190/HVF7-G5V0-TTJ4-E1B0 HVF7G5V0TTJ4E1B0 1 On the Superiority of Liability Rules in Environmental Litigation 185 198 20020509 20020509 20020509 20020509 HVF7G5V0TTJ4E1B0.pdf http://baywood.metapress.com/link.asp?target=contribution&id=HVF7G5V0TTJ4E1B0 3 David L. Barkley Dennis C. Cory Department of Agricultural Economics, University of Arizona, Tucson A variety of contemporary external cost situations are characterized by the small number of affected parties involved. In resolving externality situations characterized by small numbers, much of the theoretical literature has addressed the relative merits of the collective authority using a property rule or imposing liability rules. While the consensus of previous analysis is that a clear-cut case for one approach or the other cannot be made, it is argued here that under plausible assumptions, liability rules will generally be superior on both efficiency and equity grounds. R. H. Coase, The Problem of Social Cost, <i>Journal of Law and Economics, III</i>, pp. 1-44, October 1960. R. Turvey, On the Divergences Between Social Cost and Private Cost, <i>Economica, XXX</i>, pp. 309-313, August 1963. J. M. Buchanan and W. C. Stubblebine, Externality, <i>Economica, XXIX</i>: 116, pp. 371-384, November 1962. G. Calabresi and A. D. Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, <i>Harvard Law Review, 85</i>:6, pp. 1089-1128, April 1972. O. A. Davis and A. B. Whinston, Externalities, Welfare, and the Theory of Games, <i>Journal of Political Economy, 70</i>:3, pp. 241-262, June 1962. H. E. Freeh, III, The Extended Coase Theorem and Long Run Equilibrium: The Nonequivalence of Liability Rules and Property Rights, <i>Economic Enquiry, 17</i>:2, pp. 254-268, April 1979. A. M. Polinsky, On the Choice Between Property Rules and Liability Rules, <i>Economic Enquiry, XVIII</i>, pp. 233-246, April 1980.