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8 Asian J.L. & Econ. 1 (2017)

handle is hein.journals/ajle8 and id is 1 raw text is: Asian Journal of Law and Economics 2017; 8(1): 20150032 Carlos Seiglie and Jun Xiang* Determining Values Using Options Contracts DOI 10.1515/ajle-2015-0032 Abstract: This paper presents a simple mechanism for allocating a single good in partnership dissolution. Since in the areas of probate, family, partnership and bankruptcy law the establishment of the value of assets is essential this mecha- nism can be useful. We illustrate its application for the case of determining the value of a house in a divorce proceeding. We show that when transactions costs are permitted, our mechanism shows a wider range of equilibrium outcomes than existing mechanisms such as Texas shootouts, implying it offers more equal and fair divisions. In addition, if private valuations of an asset are allowed, the pro- posed mechanism has an advantage based on the efficiency criterion compared to Texas shootouts. Keywords: conflict; divorce; options. I Introduction Determining the value of property or assets is fundamental to law. Without the establishment of value, the issues surrounding the division of assets are ambiguous. Some examples where the establishment of value is critical for practical applications are in the areas of probate, family law, partnership and bankruptcy law. In each of these areas, the law specifies how a particular division 1 There is a literature which questions the commodification of certain assets and by implication their marketability or transferability. This inability would imply that value is difficult or impossi- ble to assess. Equally, there exists the philosophical question of commensurability of commodi- ties and therefore the inability to compare values (e.g. Sunstein 1994). For a critique of market valuation, see Radin (1987). The assumption in this paper is that choices or opportunities can be compared by individuals and that a well-defined ordering of their preferences exists. *Corresponding author: Jun Xiang, Rutgers, State University of New Jersey - Economics and Global Affairs, 360 MLI( blvd, Newark, NJ, USA, e-mail: junxiang@rutgers.edu Carlos Seiglie: Rutgers, State University of New Jersey - Economics, Newark, NJ, USA DE GRUYTER

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