Costs must be incurred if an owner is to enforce private property rights effectively. We show that, in a perfectly competitive economy, private decisions to enforce rights may result in either more or less enforcement than is socially efficient. Cases of multiple stable equilibria occur, and an equilibrium may be locally, but not globally, efficient. Resources may not be employed in their socially most valuable uses, and enforcement may be accompanied by inefficient investment in resource productivity.

Costs must be incurred if an owner is to enforce private property rights effectively. We show that, in a perfectly competitive economy, private decisions to enforce rights may result in either more or less enforcement than is socially efficient. Cases of multiple stable equilibria occur, and an equilibrium may be locally, but not globally, efficient. Resources may not be employed in their socially most valuable uses, and enforcement may be accompanied by inefficient investment in resource productivity.