Concordance Among Holdouts

Abstract

Holdout problems prevent decentralized aggregation of complementary goods, but the coercion required to overcome holdout may encourage abuse and violate fairness standards. We propose second-best efficiency, abuse-prevention, and fairness criteria for procedures intended to reduce holdout. Our criteria are jointly satisfied by a class of “Concordance” procedures. In these procedures, the prospective buyer makes a take-it-or-leave-it offer to the group of sellers, and the sellers use an efficient collective choice mechanism to decide as a group whether to accept the buyer’s offer. In the case of sale, the buyer’s offer is divided among the sellers in a fashion independent of individual sellers’ actions. Each seller retains the option to receive, in the event of sale, her share of the offer (without making any additional payments) in exchange for not influencing the collective decision. Our approach is applicable in a range of contexts including land assembly, spectrum aggregation, corporate acquisitions, and patent pool formation.

Keywords: Holdout, Market Design, Public Goods, Quasi-Lindahl, Anticommons, Eminent Domain

JEL Classification: D40, D63 D71, D82, L10, K11