Final answer:
Property rights are the legal ownership rights that define both parties' interests in a property, essential for resolving disputes and determining responsibility for associated costs and risks.
Step-by-step explanation:
The property in which a pipeline company and a landowner both have a shared interest is known as property rights. These rights define the legal ownership and the boundaries of use for the land and resources involved. Noted economist Ronald Coase stressed the importance of clearly defined property rights in resolving disputes; these rights dictate who owns the land, who can use it, and under what conditions. For example, in a case where a pipeline company wishes to run a pipeline across privately owned land, the landowner holds certain property rights that the company cannot infringe upon without appropriate compensation and agreement.
If both parties have well-defined legal responsibilities, then the party responsible for a potential risk, such as a fire caused by a pipeline, would seek and pay for the most efficient solution to mitigate that risk. By defining property rights, one can determine if either the landowner or the pipeline company bears the cost associated with the property's use and the risks involved.