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American Economic Review: Vol. 102 No. 3 (May 2012)

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Holdout in the Assembly of Complements: A Problem for Market Design

Article Citation

Kominers, Scott Duke, and E. Glen Weyl. 2012. "Holdout in the Assembly of Complements: A Problem for Market Design." American Economic Review, 102(3): 360-65.

DOI: 10.1257/aer.102.3.360

Abstract

Holdout problems prevent private (voluntary and self-financing) assembly of complementary goods—such as land or dispersed spectrum—from many self-interested sellers. While mechanisms that fully respect sellers' property rights cannot alleviate these holdout problems, traditional solutions, such as the use of coercive government powers of "eminent domain" to expropriate property, can encourage wasteful and unfair assemblies. We discuss the problems holdout creates for the efficient operation of markets and how previous approaches have used regulated coercion to address these challenges. We then investigate when encouraging competition can partially or fully substitute for coercion, focusing particularly on questions of spectrum allocation.

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Authors

Kominers, Scott Duke (Becker Freidman Institute, U Chicago)
Weyl, E. Glen (U Chicago)

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D82: Asymmetric and Private Information


American Economic Review


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