Resource Allocation with Spatial Externalities: Experiments on Land Consolidation
33 Pages Posted: 8 Sep 2005
Date Written: September 2005
This paper compares the performance of direct negotiation, double auction, and a two-sided combinatorial call market for consolidating fragmented land. Experimental results suggest direct negotiation produces higher efficiencies than other mechanisms 1) when all commodities need to be traded to achieve efficiency, and 2) subjects are well exposed to various experimental formats. The combinatorial call market performs well 1) when swapping is easily agreeable, and 2) when the number of subjects and commodities are increased and the initial endowments are unchallenging. The two-sided combinatorial call market suffers from the holdout problem when the number of subjects and commodities is small.
Keywords: Mechanism design, Two-sided combinatorial auction, Holdout
JEL Classification: C92
Suggested Citation: Suggested Citation