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Holdout in the Assembly of Complements: A Problem for Market Design

  • Scott Duke Kominers
  • E. Glen Weyl

Holdout problems prevent private (voluntary and self-financing) assembly of complementary goods--such as land or dispersed spectrum--from many self-interested sellers. While mechanisms that fully respect sellers' property rights cannot alleviate these holdout problems, traditional solutions, such as the use of coercive government powers of "eminent domain" to expropriate property, can encourage wasteful and unfair assemblies. We discuss the problems holdout creates for the efficient operation of markets and how previous approaches have used regulated coercion to address these challenges. We then investigate when encouraging competition can partially or fully substitute for coercion, focusing particularly on questions of spectrum allocation.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.360
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 3 (May)
Pages: 360-65

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:360-65
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  1. Casella, Alessandra & Llorente-Saguer, Aniol & Palfrey, Thomas R, 2010. "Competitive equilibrium in Markets for Votes," CEPR Discussion Papers 7992, C.E.P.R. Discussion Papers.
  2. Ledyard, John O. & Palfrey, Thomas R., 2000. "The Approximation of Efficient Public Good Mechanisms by Simple Voting Schemes," Working Papers 1092, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Grossman, Zachary & Pincus, Jonathan & Shapiro, Perry, 2010. "A Second-Best Mechanism for Land Assembly," University of California at Santa Barbara, Economics Working Paper Series qt1dn8g6vk, Department of Economics, UC Santa Barbara.
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