IDEAS home Printed from https://ideas.repec.org/a/bpj/rlecon/v9y2013i1p151-167n8.html
   My bibliography  Save this article

The Problem with the Holdout Problem

Author

Listed:
  • López Edward J.

    (Western Carolina University, Cullowhee, NC, USA)

  • Clark J.R.

    (The University of Tennessee-Chattanooga, Chattanooga, TN, USA)

Abstract

Recent theoretical work has investigated the exact mechanism(s) by which the holdout problem creates inefficiency and thereby justifies eminent domain. In parallel, recent empirical work has demonstrated that state courts and legislatures either grant discretion to, or prohibit, local authorities from using eminent domain for economic development. This article extends Miceli’s (2011) strategic holdout model to incorporate political inefficiencies that may emerge when granting discretionary powers. Using eminent domain for non-efficiency-enhancing purposes substitutes for voluntary exchange, which is optimal, and attracts rent seeking by developers. Therefore, the efficiency justification for eminent domain is conditional. It depends on the relative magnitudes of the market and political sources of inefficiency. This analysis informs the efficiency consequences of court rulings, most notably Kelo v. City of New London, and the various changes in states’ laws that followed.

Suggested Citation

  • López Edward J. & Clark J.R., 2013. "The Problem with the Holdout Problem," Review of Law & Economics, De Gruyter, vol. 9(1), pages 151-167, September.
    • Handle: RePEc:bpj:rlecon:v:9:y:2013:i:1:p:151-167:n:8
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/rle.2013.9.issue-1/rle-2012-0031/rle-2012-0031.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Miceli, 2011. "Free riders, holdouts, and public use: a tale of two externalities," Public Choice, Springer, vol. 148(1), pages 105-117, July.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-362, June.
    4. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
    5. James M. Buchanan, 1962. "Politics, Policy, and the Pigovian Margins," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 10, pages 204-218, Palgrave Macmillan.
    6. Thomas J. Miceli & Kathleen Segerson, 2007. "A Bargaining Model of Holdouts and Takings," American Law and Economics Review, American Law and Economics Association, vol. 9(1), pages 160-174.
    7. Fleck, Robert K. & Hanssen, F. Andrew, 2010. "Repeated adjustment of delegated powers and the history of eminent domain," International Review of Law and Economics, Elsevier, vol. 30(2), pages 99-112, June.
    8. Kitchens, Carl & Roomets, Alex, 2015. "Dealing with eminent domain," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 54(C), pages 22-31.
    9. R. Kenneth Godwin & Edward J. López & Barry J. Seldon, 2006. "Incorporating Policymaker Costs and Political Competition into Rent-Seeking Games," Southern Economic Journal, John Wiley & Sons, vol. 73(1), pages 37-54, July.
    10. Lopez Edward J. & Jewell R. Todd & Campbell Noel D., 2009. "Pass a Law, Any Law, Fast! State Legislative Responses to the Kelo Backlash," Review of Law & Economics, De Gruyter, vol. 5(1), pages 101-135, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cadigan, John & Schmitt, Pamela & Shupp, Robert & Swope, Kurtis, 2011. "The holdout problem and urban sprawl: Experimental evidence," Journal of Urban Economics, Elsevier, vol. 69(1), pages 72-81, January.
    2. Isaac, R. Mark & Kitchens, Carl & Portillo, Javier E., 2016. "Can buyer “mobility” reduce aggregation failures in land-assembly?," Journal of Urban Economics, Elsevier, vol. 95(C), pages 16-30.
    3. Portillo, Javier E., 2019. "Land-assembly and externalities: How do positive post-development externalities affect land aggregation outcomes?," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 104-124.
    4. Kurtis Swope & Ryan Wielgus & Pamela Schmitt & John Cadigan, 2011. "Contracts, Behavior, and the Land-assembly Problem: An Experimental Study," Research in Experimental Economics, in: Experiments on Energy, the Environment, and Sustainability, pages 151-180, Emerald Group Publishing Limited.
    5. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
    6. Bernholz, Peter, 1997. "Property rights, contracts, cyclical social preferences and the Coase theorem: A synthesis," European Journal of Political Economy, Elsevier, vol. 13(3), pages 419-442, September.
    7. Petrick, Martin, 2004. "Governing Structural Change And Externalities In Agriculture: Toward A Normative Institutional Economics Of Rural Development," IAMO Discussion Papers 14878, Institute of Agricultural Development in Transition Economies (IAMO).
    8. Hummel Jeffrey Rogers & Lavoie Don, 1994. "National Defense And The Public-Goods Problem," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 5(2-3), pages 1-26, June.
    9. Darcy W. E. Allen & Chris Berg & Sinclair Davidson & Jason Potts, 2022. "On Coase and COVID-19," European Journal of Law and Economics, Springer, vol. 54(1), pages 107-125, August.
    10. Haucap, Justus, 2021. "Glücksspielregulierung aus ordnungsökonomischer Perspektive," DICE Ordnungspolitische Perspektiven 110, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. John Cadigan & Pamela Schmitt & Robert Shupp & Kurtis Swope, 2009. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Southern Economic Journal, John Wiley & Sons, vol. 76(2), pages 444-457, October.
    12. Daniel Göller & Michael Hewer, 2014. "Economic Analysis of Taking Rules: The Bilateral Investment Case," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(3), pages 520-536, September.
    13. Ervin, David E. & Fox, Glenn, 1998. "Environmental Policy Considerations In The Grain-Livestock Subsectors In Canada, Mexico And The United States," Proceedings of the 4th Agricultural and Food Policy Systems Information Workshop 1998: Economic Harmonization in the Canadian\U.S.\Mexican Grain-Livestock Subsector; 16754, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
    14. Sean M. Collins & R. Mark Isaac, 2012. "Holdout: Existence, Information, and Contingent Contracting," Journal of Law and Economics, University of Chicago Press, vol. 55(4), pages 793-814.
    15. Christian Leuz, 2010. "Different approaches to corporate reporting regulation: How jurisdictions differ and why," Accounting and Business Research, Taylor & Francis Journals, vol. 40(3), pages 229-256.
    16. Roumasset, James A., 1994. "Explaining Diversity In Agricultural Organization: An Agency Perspective," Bulletins 12982, University of Minnesota, Economic Development Center.
    17. Bruno Tinel, 2004. "Que reste-t-il de la contribution d'Alchian et Demsetz à la théorie de l'entreprise ?," Post-Print halshs-00270895, HAL.
    18. Elzas, B.D., 1998. "Williamson's "New Institutional Economics" : a case for applying Ockham's razor," Serie Research Memoranda 0037, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    19. Adam Martin, 2014. "Where are the big bills? Escaping the endogenizer’s dilemma," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(1), pages 81-95, March.
    20. Thomas Apolte, 2004. "Die eigentümliche Diskussion um Zentralisierung und Dezentralisierung in der Europapolitik," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(3), pages 271-291, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rlecon:v:9:y:2013:i:1:p:151-167:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.