Second-Best Mechanisms for Land Assembly and Hold-Out Problems

Abstract

Land can be inefficiently allocated when attempts to assemble separately-owned parcels are frustrated by holdouts. Eminent domain can be used neither to gauge efficiency nor to determine adequate compensation. We characterize the least-inefficient class of direct mechanisms that are incentive compatible, self-financing, and protect the property-rights of participants. The second-best mechanisms, which we call Strong Pareto (SP), utilize a second-price auction among interested buyers, with a reserve sufficient to compensate fully all potential sellers, who are paid according to fixed and exhaustive shares of the winning buyer's offer. These mechanisms are strategy-proof (dominant-strategy incentive compatible), individually rational and self-financing. They generate higher social welfare in each problem compared to any other type of mechanism satisfying these properties.

Presenter

Presented by Associate Professor Duygu Yengin, The University of Adelaide.

Further information

While here Associate Professor Duygu Yengin will be using room 520A Colin Clark building. If you would like to meet with her or have lunch or dinner with her please contact Dr Metin Uyanik who will be her host while at The University of Queensland. Dr Metin can be contacted on m.uyanik.@uq.edu.au.