Evolving environmental laws have expanded the number of agents with legitimate environmental property rights. Injunctive remedies to increasingly contested exchanges affect the value of the right itself, and therefore the behavior of potential traders. Recent amendments to New Mexico Water Law provide an excellent opportunity to explore these effects. We explore the behavior of traders given a decrease in the probability of successfully completing a transaction. Our experiments show traders have a propensity to over-respond to the threat of injunctive remedies, and consequently reduce their volume of trades below the privately optimal volume of trades.
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