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A Bargaining Model of Holdouts and Takings

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  • Thomas J. Miceli
  • Kathleen Segerson

Abstract

The holdout problem is commonly cited as the justification for eminent domain, but the nature of the problem is not well understood. This article models the holdout problem in a bargaining framework, where a developer seeks to acquire several parcels of land for a large-scale development. We show that in the absence of eminent domain, holdouts are a significant threat, resulting in costly delay. However, if the developer has the power to use eminent domain to acquire the land from holdouts, all sellers will bargain, thus avoiding delay. An offsetting cost is that owners may negotiate prices below their true value, possibly resulting in excessive transfer of land to the developer. Copyright 2007, Oxford University Press.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:amlawe:v:9:y:2007:i:1:p:160-174
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    References listed on IDEAS

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    1. Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-362, June.
    2. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(1), pages 71-92.
    3. Hermalin, Benjamin E, 1995. "An Economic Analysis of Takings," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 64-86, April.
    4. Menezes, Flavio Marques & Pitchford, Rohan, 2001. "Chasing patents," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 411, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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