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Sequential Bargaining, Land Assembly, and the Holdout Problem

Author

Listed:
  • Thomas J. Miceli

    (University of Connecticut)

  • Kathleen Segerson

    (University of Connecticut)

Abstract

Although the holdout problem is a well-established part of legal and economic lore, the exact source of the problem is not well understood. The problem is usually attributed to high transaction costs or excessive bargaining power on the part of sellers once they recognize the scope of the project. In an effort to isolate the essential features of the problem, this paper considers the simplest possible setting in which a buyer bargains sequentially with a series of sellers, each of whose land is necessary to realize the gain from a large-scale project. Using ordinary Nash bargaining and assuming complete information, we identify a minimum set of factors that give rise to a holdout problem, which highlight the importance of commitment and the inefficiency of partial assembly.

Suggested Citation

  • Thomas J. Miceli & Kathleen Segerson, 2011. "Sequential Bargaining, Land Assembly, and the Holdout Problem," Working papers 2011-13, University of Connecticut, Department of Economics, revised Jan 2012.
    • Handle: RePEc:uct:uconnp:2011-13
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    Citations

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    Cited by:

    1. Hans-Bernd Schäfer & Ram Singh, 2018. "Takings of Land by Self-Interested Governments: Economic Analysis of Eminent Domain," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 427-459.
    2. Thomas Miceli, 2014. "The color of law: an economic theory of legal boundaries," European Journal of Law and Economics, Springer, vol. 38(2), pages 185-209, October.
    3. Isaac, R. Mark & Kitchens, Carl & Portillo, Javier E., 2016. "Can buyer “mobility” reduce aggregation failures in land-assembly?," Journal of Urban Economics, Elsevier, vol. 95(C), pages 16-30.
    4. Zillante, Artie & Read, Dustin C. & Seiler, Michael J., 2020. "Assembling land for urban revitalization in the presence of linchpin parcels and information asymmetries: An experimental investigation," Land Use Policy, Elsevier, vol. 99(C).
    5. Kanazawa, Mark, 2023. "Politics and eminent domain: Evidence from the 1879 California constitution," Explorations in Economic History, Elsevier, vol. 90(C).
    6. Soumendu Sarkar & Dhritiman Gupta, 2023. "Bargaining for assembly," Theory and Decision, Springer, vol. 95(2), pages 229-254, August.
    7. Kaur Karamjit, 2017. "On the Rationale of Coercive Land Acquisitions," Asian Journal of Law and Economics, De Gruyter, vol. 8(2), pages 1-16, August.
    8. Yong Liu & Ting Zhou & Jeffrey Yi-Lin Forrest, 2020. "A Multivariate Minimum Cost Consensus Model for Negotiations of Holdout Demolition," Group Decision and Negotiation, Springer, vol. 29(5), pages 871-899, October.
    9. Thomas J. Miceli & Kathleen Segerson, 2021. "Assessing Kelo’s Legacy: Do Increased Taxes and New Jobs Justify Use of Eminent Domain?," The Journal of Real Estate Finance and Economics, Springer, vol. 63(2), pages 161-176, August.
    10. 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.
    11. 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.
    12. Portillo, Javier E., 2019. "Land-assembly and externalities: How do positive post-development externalities affect land aggregation outcomes?," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 104-124.
    13. Thomas J. Miceli, 2014. "The Cost of Kelo: Are Property Taxes a Form of Public Use?," Working papers 2014-35, University of Connecticut, Department of Economics.
    14. Soumendu Sarkar, 2022. "Strategyproof and Budget Balanced Mechanisms for Assembly," Working papers 320, Centre for Development Economics, Delhi School of Economics.
    15. Göller, Daniel & Hewer, Michael, 2015. "Breakdown in multilateral negotiations," Journal of Economic Theory, Elsevier, vol. 157(C), pages 478-484.

    More about this item

    Keywords

    Bargaining; holdout problem; land assembly;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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