Free riders and holdouts are market failures that potentially impede the completion of otherwise beneficial transactions. The key difference is that the free rider problem is a demand side externality that requires taxation to compel payment for a public good, while the holdout problem is a supply side externality that requires eminent domain to force the sale of land for large scale projects. This paper highlights that distinction between these two problems and uses the resulting insights to clarify the meaning of the public use requirement of the Fifth Amendment takings clause.
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number
2009-01.
Length: Date of creation: Jan 2009 Date of revision: Handle: RePEc:uct:uconnp:2009-01
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Find related papers by JEL classification: H41 - Public Economics - - Publicly Provided Goods - - - Public Goods K11 - Law and Economics - - Basic Areas of Law - - - Property Law
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