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Promoting Mediation in Property Rights Conflicts

This paper analyzes the judicial resolution of land-use conflicts and then derives a technique to promote mediation of these and other property rights disputes. A simple theory is developed comparing Coasean bargaining over unallocated property rights to nonmarket resolution. The analysis leads to a signaling model of nonmarket resolution, which is estimated empirically using land-use conflict data from New Castle County, Delaware. The model may be used to send future disputants a "signal" of their probability of success in litigation, which may act as a focal point in mediation. (JEL K11, R14)