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Holdout in the Assembly of Complements: A Problem for Market Design

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  • Scott Duke Kominers
  • E. Glen Weyl

Abstract

Holdout problems prevent private (voluntary and self-financing) assembly of complementary goods--such as land or dispersed spectrum--from many self-interested sellers. While mechanisms that fully respect sellers' property rights cannot alleviate these holdout problems, traditional solutions, such as the use of coercive government powers of "eminent domain" to expropriate property, can encourage wasteful and unfair assemblies. We discuss the problems holdout creates for the efficient operation of markets and how previous approaches have used regulated coercion to address these challenges. We then investigate when encouraging competition can partially or fully substitute for coercion, focusing particularly on questions of spectrum allocation.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.360
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 3 (May)
Pages: 360-65

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:360-65

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  1. Alessandra Casella & Aniol Llorente-Saguer & Thomas R. Palfrey, 2012. "Competitive Equilibrium in Markets for Votes," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_03, Max Planck Institute for Research on Collective Goods.
  2. Ledyard, John O. & Palfrey, Thomas R., 2002. "The approximation of efficient public good mechanisms by simple voting schemes," Journal of Public Economics, Elsevier, vol. 83(2), pages 153-171, February.
  3. Grossman, Zachary & Pincus, Jonathan & Shapiro, Perry, 2010. "A Second-Best Mechanism for Land Assembly," University of California at Santa Barbara, Economics Working Paper Series qt1dn8g6vk, Department of Economics, UC Santa Barbara.
  4. Scott Duke Kominers & E. Glen Weyl, 2012. "Holdout in the Assembly of Complements: A Problem for Market Design," American Economic Review, American Economic Association, vol. 102(3), pages 360-65, May.
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Cited by:
  1. Scott Duke Kominers & E. Glen Weyl, 2012. "Holdout in the Assembly of Complements: A Problem for Market Design," American Economic Review, American Economic Association, vol. 102(3), pages 360-65, May.

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