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Can buyer “mobility” reduce aggregation failures in land-assembly?

R. Isaac, Carl Kitchens and Javier E. Portillo

Journal of Urban Economics, 2016, vol. 95, issue C, 16-30

Abstract: In this paper we examine whether site-development competition can be used to facilitate land assembly, in the absence of contingent contracts. In particular, we attempt to determine (1) whether competition can be induced among prospective sellers, (2) whether or not competition increases aggregation rates, and (3) what effects competition has on the distribution of surplus among the bargaining parties. We also study the incidence with which a buyer (endogenously) chooses to deal with a single “large parcel” owner vs. multiple “small parcel” owners. To do so, we make use of a laboratory experiment where all the relevant information about the project is common knowledge and landowner valuations are private information. Our results show that competition more than doubles aggregation rates, with aggregation rates of approximately 40% in the baseline, and at least 84% in the competitive treatments. We also find that developers have a strong preference to make transactions with landowners who have consolidated land holdings, doing so in 24/27 successful aggregations, providing empirical evidence that there is a link between the transactions cost associated with land-assembly and suburbanization, as suggested by Miceli and Sirmans (2007).

Keywords: Land assembly; Urban sprawl; Holdout problem (search for similar items in EconPapers)
JEL-codes: C9 D79 K11 R3 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.jue.2016.06.001

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