A Bargaining Model of Holdouts and Takings

Thomas Miceli () and Kathleen Segerson ()

No 2006-22, Working papers from University of Connecticut, Department of Economics

Abstract: The holdout problem is commonly cited as the justification for eminent domain, but the nature of the problem is not well understood. This paper 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 inevitable, threatening 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: Eminent domain; holdout problem; bargaining (search for similar items in EconPapers)
JEL-codes: C78 K11 R14 R52 (search for similar items in EconPapers)
Date: 2006-06, Revised 2007-03
Note: We acknowledge the comments of participants at the Takings Conference at the University of California, Santa Barbara, May 12-13, 2006.
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http://www.econ.uconn.edu/working/2006-22r.pdf Full text (revised version) (application/pdf)
http://www.econ.uconn.edu/working/2006-22.pdf Full text (original version) (application/pdf)

Related works:
Journal Article: A Bargaining Model of Holdouts and Takings (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2006-22

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