Economics at your fingertips  

Second-Best Mechanisms for Land Assembly and Hold-Out Problems

Zachary Grossman (), Jonathan Pincus (), Perry Shapiro and Duygu Yengin ()

No 2018-14, School of Economics Working Papers from University of Adelaide, School of Economics

Abstract: Land can be inefficiently allocated when attempts to assemble separately-owned parcels are frustrated by holdouts. Eminent domain can be used neither to gauge efficiency nor to determine adequate compensation. We characterize the least-inefficient class of direct mechanisms that are incentive compatible, self-financing, and protect the property-rights of participants. The second-best mechanisms, which we call Strong Pareto (SP), utilize a second-price auction among interested buyers, with a reserve sufficient to compensate fully all potential sellers, who are paid according to fixed and exhaustive shares of the winning buyer's offer. These mechanisms are strategy-proof (dominant-strategy incentive compatible), individually rational and self-financing. They generate higher social welfare in each problem compared to any other type of mechanism satisfying these properties.

Keywords: Land assembly; assembly problems; complementary goods; hold-out; eminent domain; property rights; mechanism design; desirable properties; impossibility theorem; second-best characterization; SP mechanism; just compensation; public-private partnerships; incentive compatibility; strategy-proofness; individual rationality; budget-balance; self-nance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des and nep-mic
Date: 2018-09
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Second-best mechanisms for land assembly and hold-out problems (2019) Downloads
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:

Access Statistics for this paper

More papers in School of Economics Working Papers from University of Adelaide, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Groshenny ().

Page updated 2019-10-17
Handle: RePEc:adl:wpaper:2018-14