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

5 Pages Posted: 14 Jan 2012  

Scott Duke Kominers

Harvard University

E. Glen Weyl

Microsoft Research; Yale University

Date Written: January 13, 2012

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.

Keywords: holdout, public goods, complementary goods, spectrum allocation

JEL Classification: D40, D60, D71, H41, K11, L13

Suggested Citation

Kominers, Scott Duke and Weyl, E. Glen, Holdout in the Assembly of Complements: A Problem for Market Design (January 13, 2012). American Economic Review, Vol. 102, No. 3, 2012. Available at SSRN: https://ssrn.com/abstract=1984887

Scott Duke Kominers

Harvard University ( email )

Rock Center, Harvard Business School
Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

Eric Glen Weyl (Contact Author)

Microsoft Research ( email )

641 Avenue of the Americas
7th Floor
New York, NY 10011
United States
(857) 998-4513 (Phone)

HOME PAGE: http://www.glenweyl.com

Yale University ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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