The Evolution of Private Property

Experimental studies have shown that subjects exhibit a systematic endowment effect. No acceptable explanation for the existence of this behavior has been offered. This paper shows that the endowment effect can be modeled as respect for private property in the absence of legal institutions ensuring third-party contract enforcement. In this sense, “natural” private property has been observed in many species, in the form of recognition of territorial incumbency. We develop a model loosely based on the Hawk-Dove-Bourgeois game (Maynard Smith & Parker 1976) and the War of Attrition (Maynard Smith & Price 1973) to explain the natural evolution of private property. Journal of Economic Literature Classification: D01—Microeconomic Behavior: Underlying Principles