Free riders, holdouts, and public use: a tale of two externalities
Free riders and holdouts are market failures that potentially impede the completion of otherwise beneficial transactions. The key difference is that the free rider problem is a demand side externality that requires taxation to compel payment for a public good, while the holdout problem is a supply side externality that requires eminent domain to force the sale of land for large scale projects. This paper highlights that distinction between these two problems and uses the resulting insights to clarify the meaning of the public use requirement of the Fifth Amendment takings clause.
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- Florenz Plassmann & T. Nicolaus Tideman, 2008. "Accurate Valuation in the Absence of Markets," Public Finance Review, SAGE Publishing, vol. 36(3), pages 334-358, May.
- Thomas J. Miceli & Kathleen Segerson, 2007.
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- 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.
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- Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-62, June.
- Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
- Miceli, Thomas J. & Segerson, Kathleen & Sirmans, C.F., 2008. "Tax Motivated Takings," National Tax Journal, National Tax Association, vol. 61(4), pages 579-91, December.
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