The Holdout Problem and Urban Sprawl: Experimental Evidence
AbstractConventional wisdom as well as economic theory suggests it is more costly to reassemble fragmented land due to transactions costs and strategic bargaining costs. Both costs are expected to increase with the number of sellers. Inefficient allocation of land resources may result including property entropy (Parisi 2002), urban sprawl (Miceli and Sirmans 2007) and deteriorating inner cities. Given the difficulty of observing actual values attached by buyers and sellers to land, little empirical evidence exists to support the conventional wisdom and theoretical work. We use experimental methods to examine transactions costs and strategic bargaining costs in a land-assembly market game with one buyer, one to four sellers, and complementary exchanges. The buyer’s final earnings vary inversely with the number of sellers, ceteris paribus, indicating an incentive to purchase consolidated land. Delay costs reduce holdout, but result in lower payoffs for both buyers and sellers. Competition between sellers reduces holdout and the buyer’s total purchase price.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by United States Naval Academy Department of Economics in its series Departmental Working Papers with number 24.
Length: 23 pages
Date of creation: Sep 2009
Date of revision:
Other versions of this item:
- 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.
- NEP-ALL-2010-04-17 (All new papers)
- NEP-EXP-2010-04-17 (Experimental Economics)
- NEP-URE-2010-04-17 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fehr, Ernst & Schmidt, Klaus M., 1998.
"A Theory of Fairness, Competition and Cooperation,"
CEPR Discussion Papers
1812, C.E.P.R. Discussion Papers.
- Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
- Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
- Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
- Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
- Miceli, Thomas J. & Sirmans, C.F., 2007. "The holdout problem, urban sprawl, and eminent domain," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 309-319, November.
- Gneezy, Uri & Haruvy, Ernan & Roth, Alvin E., 2003. "Bargaining under a deadline: evidence from the reverse ultimatum game," Games and Economic Behavior, Elsevier, vol. 45(2), pages 347-368, November.
- Peter Cramton & Joseph S. Tracy, 1992.
"Strikes and Holdouts in Wage Bargaining: Theory and Data,"
Papers of Peter Cramton
92aer, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
- Kurtis Swope & Pamela Schmitt & John Cadigan & Robert Shupp, 2008.
"An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game,"
Departmental Working Papers
21, United States Naval Academy Department of Economics.
- John Cadigan & Pamela Schmitt & Robert Shupp & Kurtis Swope1, 2009. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 344-457, October.
- Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer, vol. 24(2), pages 231-253, August.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Thomas J. Miceli & Kathleen Segerson, 2007.
"A Bargaining Model of Holdouts and Takings,"
American Law and Economics Review,
Oxford University Press, vol. 9(1), pages 160-174.
- Ed Nosal, 2007. "Private takings," Working Paper 0713, Federal Reserve Bank of Cleveland.
- Eckart, Wolfgang, 1985. "On the land assembly problem," Journal of Urban Economics, Elsevier, vol. 18(3), pages 364-378, November.
- Brown, David T, 1989. "Claimholder Incentive Conflicts in Reorganization: The Role of Bankruptcy Law," Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 109-23.
- Rapoport, Amnon & Sundali, James A, 1996. "Ultimatums in Two-Person Bargaining with One-Sided Uncertainty: Offer Games," International Journal of Game Theory, Springer, vol. 25(4), pages 475-94.
- Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
- Datta, Sudip & Iskandar-Datta, Mai E, 1995. "Reorganization and Financial Distress: An Empirical Investigation," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 18(1), pages 15-32, Spring.
- van Ours, Jan C., 1999. "The cyclical behavior of holdout durations," Economics Letters, Elsevier, vol. 62(3), pages 365-370, March.
- Croson, Rachel T. A., 1996. "Information in ultimatum games: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 197-212, August.
- Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
- Abdullah Yavas & Thomas J. Miceli & C.F. Sirmans, 2001. "An Experimental Analysis of the Impact of Intermediaries on the Outcome of Bargaining Games," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(2), pages 251-276.
- 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.
- Houba, Harold & Bolt, Wilko, 2000. "Holdouts, backdating and wage negotiations," European Economic Review, Elsevier, vol. 44(9), pages 1783-1800, October.
- Hege, Ulrich, 2003. "Workouts, court-supervised reorganization and the choice between private and public debt," Journal of Corporate Finance, Elsevier, vol. 9(2), pages 233-269, March.
- Ours, J.C. van, 1999. "The cyclical behavior of holdout durations," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80320, Tilburg University.
- Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-62, June.
- Tomomi Tanaka, 2005. "Resource allocation with spatial externalities: Experiments on land consolidation," Experimental 0511004, EconWPA.
- Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
- Pamela Schmitt, 2004. "On Perceptions of Fairness: The Role of Valuations, Outside Options, and Information in Ultimatum Bargaining Games," Experimental Economics, Springer, vol. 7(1), pages 49-73, February.
- Straub, Paul G. & Murnighan, J. Keith, 1995. "An experimental investigation of ultimatum games: information, fairness, expectations, and lowest acceptable offers," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 345-364, August.
- Menezes, Flavio & Pitchford, Rohan, 2004.
"The land assembly problem revisited,"
Regional Science and Urban Economics,
Elsevier, vol. 34(2), pages 155-162, March.
- Menezes, Flavio Marques & Pitchford, Rohan, 2001. "The Land Assembly Problem Revisited," Economics Working Papers (Ensaios Economicos da EPGE) 427, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Gu, Wulong & Kuhn, Peter, 1998. "A Theory of Holdouts in Wage Bargaining," American Economic Review, American Economic Association, vol. 88(3), pages 428-49, June.
- Kurtis Swope & Pamela Schmitt & John Cadigan & Ryan Wielgus, 2010. "Contracts, Behavior, and the Land-Assembly Problem:An Experimental Study," Departmental Working Papers 29, United States Naval Academy Department of Economics.
- Parente, Michael D. & Winn, Abel M., 2012. "Bargaining behavior and the tragedy of the anticommons," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 475-490.
If references are entirely missing, you can add them using this form.