The Problem with the Holdout Problem

Edward Lopez and Clark J.R. ()
Additional contact information
Clark J.R.: The University of Tennessee-Chattanooga, Chattanooga, TN, USA

Review of Law & Economics, 2013, vol. 9, issue 2, 151-167

Abstract: Recent theoretical work has investigated the exact mechanism(s) by which the holdout problem creates inefficiency and thereby justifies eminent domain. In parallel, recent empirical work has demonstrated that state courts and legislatures either grant discretion to, or prohibit, local authorities from using eminent domain for economic development. This article extends Miceli’s (2011) strategic holdout model to incorporate political inefficiencies that may emerge when granting discretionary powers. Using eminent domain for non-efficiency-enhancing purposes substitutes for voluntary exchange, which is optimal, and attracts rent seeking by developers. Therefore, the efficiency justification for eminent domain is conditional. It depends on the relative magnitudes of the market and political sources of inefficiency. This analysis informs the efficiency consequences of court rulings, most notably Kelo v. City of New London, and the various changes in states’ laws that followed.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.degruyter.com/view/j/rle.2013.9.issue- ... -0031.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Journal Article: The Problem with the Holdout Problem (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:9:y:2013:i:2:p:151-167:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rle/html

DOI: 10.1515/rle-2012-0031

Access Statistics for this article

Review of Law & Economics is currently edited by Francesco Parisi

More articles in Review of Law & Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().