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

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  • Scott Duke Kominers
  • E. Glen Weyl

Abstract

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.

Suggested Citation

  • Scott Duke Kominers & E. Glen Weyl, 2012. "Holdout in the Assembly of Complements: A Problem for Market Design," American Economic Review, American Economic Association, vol. 102(3), pages 360-365, May.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:360-65
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.360
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    References listed on IDEAS

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    1. Ledyard, John O. & Palfrey, Thomas R., 2002. "The approximation of efficient public good mechanisms by simple voting schemes," Journal of Public Economics, Elsevier, pages 153-171.
    2. Alessandra Casella & Aniol Llorente-Saguer & Thomas R. Palfrey, 2012. "Competitive Equilibrium in Markets for Votes," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 593-658.
    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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    Cited by:

    1. Isaac, R. Mark & Kitchens, Carl & Portillo, Javier E., 2016. "Can buyer “mobility” reduce aggregation failures in land-assembly?," Journal of Urban Economics, Elsevier, vol. 95(C), pages 16-30.
    2. Jehiel, Philippe & Lamy, Laurent, 2015. "A mechanism design approach to the Tiebout hypothesis," CEPR Discussion Papers 10758, C.E.P.R. Discussion Papers.
    3. repec:oup:oxford:v:33:y:2017:i:4:p:541-571. is not listed on IDEAS
    4. Kitchens, Carl & Roomets, Alex, 2015. "Dealing with eminent domain," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 54(C), pages 22-31.
    5. Scott Kominers & Alexander Teytelboym & Vincent Crawford, 2017. "An Invitation to Market Design," Working Papers 2017-069, Human Capital and Economic Opportunity Working Group.
    6. Cason, Timothy N. & Zubrickas, Robertas, 2017. "Enhancing fundraising with refund bonuses," Games and Economic Behavior, Elsevier, vol. 101(C), pages 218-233.

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