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Optimal compulsion for private assembly of property

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  • Zakharenko, Roman

Abstract

Multiple units of property, each owned by a seller with a private value, are perfect complements in a private redevelopment project. The paper develops a mechanism for assembly of property which (i) allows compulsory sales, (ii) does not require any transactions unless the property assembly takes place, (iii) is ex-post budget-balanced, (iv) guarantees a minimum compensation to each seller, and (v) seeks to maximize the joint welfare of sellers. The mechanism is shown to converge asymptotically, as the number of sellers grows, to the seller first-best at a high rate. The mechanism requires very little knowledge about the distributions of seller valuations, and is robust to incorrect specification of distributions of both seller or buyer valuations by the market maker.

Suggested Citation

  • Zakharenko, Roman, 2021. "Optimal compulsion for private assembly of property," Regional Science and Urban Economics, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:regeco:v:88:y:2021:i:c:s0166046220302593
    DOI: 10.1016/j.regsciurbeco.2020.103574
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    References listed on IDEAS

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    More about this item

    Keywords

    Property assembly; Compulsory purchase; Holdout; Mechanism design; Condominium deconversion;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H13 - Public Economics - - Structure and Scope of Government - - - Economics of Eminent Domain; Expropriation; Nationalization

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