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Dealing with eminent domain

Author

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  • Kitchens, Carl
  • Roomets, Alex

Abstract

In light of the U.S. Supreme Court’s recent decision, Kelo vs. New London, there has been a renewed interest in problems dealing with the acquisition of perfectly-complementary inputs, specifically in the context of land assembly and eminent domain. Using a sequential-Nash-bargaining model we examine a scenario where a buyer can purchase N identical properties from N queued sellers. We examine the scenario with respect to two bargaining processes, (i) where each contingent price must be agreed upon by buyer and seller, (ii) where the buyer has an additional option to execute a transaction at a predetermined price for a fee. Using the first mechanism, theory predicts, given equal bargaining weights, that sellers who are later in the queue will receive lower prices. Using the second mechanism, theory predicts that prices should be equal when sellers have equal bargaining weight. We experimentally test these predictions and find evidence that welfare is maximized in both treatments, and that price predictions in the second protocol align with the theory.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:soceco:v:54:y:2015:i:c:p:22-31
    DOI: 10.1016/j.socec.2014.11.004
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    References listed on IDEAS

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    Cited by:

    1. López Edward J. & Clark J.R., 2013. "The Problem with the Holdout Problem," Review of Law & Economics, De Gruyter, vol. 9(2), pages 151-167, September.
    2. Carl Kitchens, 2014. "The use of eminent domain in land assembly: The case of the Tennessee Valley Authority," Public Choice, Springer, vol. 160(3), pages 455-466, September.

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