Land Development Restrictions and Preemptive Action - On the Benefits of Differentiated Regulation

Andreas Lange and Xiangping Liu

Strategic Behavior and the Environment, 2014, vol. 4, issue 4, 393-414

Abstract: We address the problem of preemptive land development to avoid future regulation. We demonstrate that differentiated treatment of landowners is generally essential to optimally deal with preemption. While differentiated policies improve welfare, they require the regulator to be informed about landowners' types. We use a mechanism design approach to deal with the case of asymmetric information. We show how a differentiated treatment of landowners is still feasible and beneficial. Our mechanism allows some landowners to face less stringent future regulation levels against a payment that is made ex ante or is anticipated ex ante. More generally, agents (landowners) may voluntarily commit to more stringent regulation if this gives them more leniency earlier or later. Our paper thereby shows the advantages of allowing such trade-offs by linking regulation across multiple periods.

Keywords: Preemptive action; Asymmetric information; Mechanism design; Differentiated regulation; Land development (search for similar items in EconPapers)
JEL-codes: D62 D82 H23 Q24 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Land Development Restrictions and Preemptive Action- On the benefits of differentiated regulation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000051

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