Sequential Bargaining, Land Assembly, and the Holdout Problem
AbstractAlthough the holdout problem is a well-established part of legal and economic lore, the exact source of the problem is not well understood. The problem is usually attributed to high transaction costs or excessive bargaining power on the part of sellers once they recognize the scope of the project. In an effort to isolate the essential features of the problem, this paper considers the simplest possible setting in which a buyer bargains sequentially with a series of sellers, each of whose land is necessary to realize the gain from a large-scale project. Using ordinary Nash bargaining and assuming complete information, we identify a minimum set of factors that give rise to a holdout problem, which highlight the importance of commitment and the inefficiency of partial assembly.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2011-13.
Length: 20 pages
Date of creation: Jun 2011
Date of revision: Jan 2012
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Bargaining; holdout problem; land assembly;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
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