Journal Article

A Bargaining Model of Holdouts and Takings

Thomas J. Miceli and Kathleen Segerson

in American Law and Economics Review

Published on behalf of The American Law and Economics Association

Volume 9, issue 1, pages 160-174
Published in print January 2007 | ISSN: 1465-7252
Published online June 2007 | e-ISSN: 1465-7260 | DOI: https://dx.doi.org/10.1093/aler/ahm005
A Bargaining Model of Holdouts and Takings

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  • Game Theory and Bargaining Theory
  • Property Law
  • Urban, Rural, and Regional Economics
  • Regional Government Analysis

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The holdout problem is commonly cited as the justification for eminent domain, but the nature of the problem is not well understood. This article models the holdout problem in a bargaining framework, where a developer seeks to acquire several parcels of land for a large-scale development. We show that in the absence of eminent domain, holdouts are a significant threat, resulting in costly delay. However, if the developer has the power to use eminent domain to acquire the land from holdouts, all sellers will bargain, thus avoiding delay. An offsetting cost is that owners may negotiate prices below their true value, possibly resulting in excessive transfer of land to the developer.

Keywords: C78; K11; R14; R52

Journal Article.  4870 words.  Illustrated.

Subjects: Game Theory and Bargaining Theory ; Property Law ; Urban, Rural, and Regional Economics ; Regional Government Analysis

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