Efficiency of Posner's nuisance rule: A reconsideration

Abstract

We claim that Posner's nuisance rule maintains the efficiency feature even under severe informational asymmetry. This paper, as a critical assessment of an overly complicated order-reporting mechanism by KIM [2002], argues that Posner's original value-reporting mechanism alone is enough to guarantee a socially efficient outcome, despite the plaintiff's occasional incentive to overreport.