Free Riders, Holdouts, and Public Use: A Tale of Two Externalities

Thomas Miceli

No 2009-01, Working papers from University of Connecticut, Department of Economics

Abstract: Free riders and holdouts are market failures that potentially impede the completion of otherwise beneficial transactions. The key difference is that the free rider problem is a demand side externality that requires taxation to compel payment for a public good, while the holdout problem is a supply side externality that requires eminent domain to force the sale of land for large scale projects. This paper highlights that distinction between these two problems and uses the resulting insights to clarify the meaning of the public use requirement of the Fifth Amendment takings clause.

Keywords: Eminent domain; free riders; holdouts; public use; takings (search for similar items in EconPapers)
JEL-codes: H41 K11 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-law, nep-pbe and nep-ppm
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Journal Article: Free riders, holdouts, and public use: a tale of two externalities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2009-01

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