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Free riders, holdouts, and public use: a tale of two externalities

  • Thomas Miceli

    ()

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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File URL: http://hdl.handle.net/10.1007/s11127-010-9648-z
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Article provided by Springer in its journal Public Choice.

Volume (Year): 148 (2011)
Issue (Month): 1 (July)
Pages: 105-117

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Handle: RePEc:kap:pubcho:v:148:y:2011:i:1:p:105-117
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100332

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  1. 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.
  2. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
  3. Florenz Plassmann & T. Nicolaus Tideman, 2008. "Accurate Valuation in the Absence of Markets," Public Finance Review, , vol. 36(3), pages 334-358, May.
  4. Thomas J. Miceli & Kathleen Segerson & C. F. Sirmans, 2007. "Tax Motivated Takings," Working papers 2007-43, University of Connecticut, Department of Economics.
  5. Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
  6. 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.
  7. Thomas Miceli & Kathleen Segerson, 2006. "A Bargaining Model of Holdouts and Takings," Working papers 2006-22, University of Connecticut, Department of Economics, revised Mar 2007.
  8. Friedmann, Daniel, 1989. "The Efficient Breach Fallacy," The Journal of Legal Studies, University of Chicago Press, vol. 18(1), pages 1-24, January.
  9. Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-62, June.
  10. Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer, vol. 24(2), pages 231-253, August.
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