Land assembly and negative externalities: An experimental investigation of NIMBY projects

Development projects can face opposition when local landowners believe their well-being will be adversely affected—a phenomenon often characterized as NIMBY (“not in my backyard”). This paper examines how communication and a negative post-development externality affect bargaining outcomes in an experimental land market. In our laboratory experiment, a developer (buyer) seeks to purchase three of four available parcels (units) from landowners (sellers); aggregation occurs when the buyer successfully acquires three parcels. We vary (i) whether participants can communicate with one another and (ii) whether aggregation imposes a negative externality that reduces the value of any unsold parcel. Aggregation rates are highest when the externality is present and communication is disabled. The negative externality facilitates bargaining in the buyer’s favor, as sellers are more willing to sell quickly and often at relatively low prices, increasing buyer surplus. Enabling communication allows sellers to coordinate, moderately improving their outcomes. Using a large language model to analyze chat logs, we find that seller messages encouraging holdout for higher prices are associated with lower buyer surplus and a reduced likelihood of successful aggregation.