Optimal compulsion for private assembly of property

Roman Zakharenko

Regional Science and Urban Economics, 2021, vol. 88, issue C

Abstract: Multiple units of property, each owned by a seller with a private value, are perfect complements in a private redevelopment project. The paper develops a mechanism for assembly of property which (i) allows compulsory sales, (ii) does not require any transactions unless the property assembly takes place, (iii) is ex-post budget-balanced, (iv) guarantees a minimum compensation to each seller, and (v) seeks to maximize the joint welfare of sellers. The mechanism is shown to converge asymptotically, as the number of sellers grows, to the seller first-best at a high rate. The mechanism requires very little knowledge about the distributions of seller valuations, and is robust to incorrect specification of distributions of both seller or buyer valuations by the market maker.

Keywords: Property assembly; Compulsory purchase; Holdout; Mechanism design; Condominium deconversion (search for similar items in EconPapers)
JEL-codes: D47 D82 H13 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:88:y:2021:i:c:s0166046220302593

DOI: 10.1016/j.regsciurbeco.2020.103574

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