Holdout in the Assembly of Complements: A Problem for Market Design
5 Pages Posted: 14 Jan 2012
Date Written: January 13, 2012
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.
Keywords: holdout, public goods, complementary goods, spectrum allocation
JEL Classification: D40, D60, D71, H41, K11, L13
Suggested Citation: Suggested Citation