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Land Development Restrictions and Preemptive Action - On the Benefits of Differentiated Regulation

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  • Lange, Andreas
  • Liu, Xiangping

Abstract

We address the problem of preemptive land development to avoid future regulation. We demonstrate that differentiated treatment of landowners is generally essential to optimally deal with preemption. While differentiated policies improve welfare, they require the regulator to be informed about landowners' types. We use a mechanism design approach to deal with the case of asymmetric information. We show how a differentiated treatment of landowners is still feasible and beneficial. Our mechanism allows some landowners to face less stringent future regulation levels against a payment that is made ex ante or is anticipated ex ante. More generally, agents (landowners) may voluntarily commit to more stringent regulation if this gives them more leniency earlier or later. Our paper thereby shows the advantages of allowing such trade-offs by linking regulation across multiple periods.

Suggested Citation

  • Lange, Andreas & Liu, Xiangping, 2014. "Land Development Restrictions and Preemptive Action - On the Benefits of Differentiated Regulation," Strategic Behavior and the Environment, now publishers, vol. 4(4), pages 393-414, December.
  • Handle: RePEc:now:jnlsbe:102.00000051
    DOI: 10.1561/102.00000051
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    References listed on IDEAS

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    1. Robert Innes & Stephen Polasky & John Tschirhart, 1998. "Takings, Compensation and Endangered Species Protection on Private Lands," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 35-52, Summer.
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    5. Thomas J. Miceli & Kathleen Segerson, 2011. "Regulatory Takings," Working papers 2011-16, University of Connecticut, Department of Economics.
    6. Daniel Rondeau & Erwin Bulte, 2007. "Wildlife Damage and Agriculture: A Dynamic Analysis of Compensation Schemes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 490-507.
    7. Langpap, Christian, 2006. "Conservation of endangered species: Can incentives work for private landowners?," Ecological Economics, Elsevier, vol. 57(4), pages 558-572, June.
    8. Miceli, Thomas J & Segerson, Kathleen, 1994. "Regulatory Takings: When Should Compensation Be Paid?," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 749-776, June.
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    More about this item

    Keywords

    Preemptive action; Asymmetric information; Mechanism design; Differentiated regulation; Land development;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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