Resale Markets and the Assignment of Property Rights

An indivisible good is to be consumed by one of several agents. The consumption involves identity-dependent externalities to the non-consumers. Resale markets for such goods are analysed in various institutional settings with complete information, assuming the agents cannot commit to future actions. It is shown that the laissez-faire institution results in final outcomes that are welfare-equivalent irrespective of the initial structure of property rights. The final outcome need not be socially optimal, however. While the independence result is in the spirit of Coase, the inefficiency result shows that the independence and efficiency properties are logically unrelated.