Qualifications: Competition and property rights

Our focus so far has been on markets where rival firms can freely enter and exit, and private-property rights are clearly defined and enforced. The efficiency of market organization is, in fact, dependent on these two things: (1)competitive markets and (2)well-defined and enforced private-property rights.
Competition, the great regulator, can protect both buyer and seller. It protects consumers from sellers who would charge a price substantially above the cost of production or withhold a vital resource for an exorbitant amount of money. Similarly, it protects employees (sellers of their labor) from the power of any single employer (the buyers of labor). Competition equalizes the bargaining power between buyers and sellers.
When property rights are well defined, secure, and tradable, suppliers of goods and services have to pay resource owners for their use. They will not be permitted to seize and use scarce resources without compensating the owners. Neither will they be permitted to use violence (for example, to attack or invade the property of another) to get what they want. The efficiency of markets hinges on the presence of property rights – after all, people can’t easily exchange or compete for things they don’t have or can’t get property rights to. Without well-defined property rights, markets simply cannot function effectively.