Liability rules applied to tangible legal entitlements might give rise to problems of reciprocal takings in which a plaintiff and defendant engage in a protracted (and potentially endless) series of destructive takings of the same entitlement from one another. Moreover, liability rules might induce multiple takers to threaten taking, thus undermining the incentives of an initial entitlement holder to bargain to retain her entitlement with any individual potential taker. This chapter argues that the potential for multiple takings poses a real problem, but that enlightened courts can structure liability rules to economize on the litigants' private information. It considers the “numerous-takers” problem in which the use of an entitlement by one person (or multiple people) affects the welfare of numerous others. The plume of pollution provides a classic example where one factory's smoke can damage numerous residents. Numerosity makes it harder for courts to use a liability rule to harness the private information of the residents. However, numerosity also cuts against the likely efficiency of property rules, as it will be harder to bargain for efficient allocations.
Keywords: liability rules, multiple takings, legal entitlements, numerosity, pollution, private information, property rules, allocations, reciprocal takings