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Marginal Cost Pricing and Efficient Taking under Uncertainty


  • T. Nicolaus Tideman
  • Florenz Plassmann


We describe a mechanism for government taking under uncertainty that provides incentives for governments to make efficient taking decisions and for property owners to use their properties efficiently. We argue that efficiency in takings requires that governments not only pay the value of property when it is taken but also pay the reduction in property value that they cause when identifying properties as potential targets of takings. This is a straightforward application of the general principle of marginal cost pricing. Unlike existing proposals to improve the efficiency of takings, our mechanism requires governments to pay amounts that are sufficient to fully compensate property owners for their losses.

Suggested Citation

  • T. Nicolaus Tideman & Florenz Plassmann, 2007. "Marginal Cost Pricing and Efficient Taking under Uncertainty," Working Papers e07-7, Virginia Polytechnic Institute and State University, Department of Economics.
  • Handle: RePEc:vpi:wpaper:e07-7

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    Uncertainty; Government; Efficient Property Use;

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