Institutional imperfections and buyer-induced holdout in land acquisition

Saha, Sreeparna; Chowdhury, Prabal Roy; Roy, Jaideep; Wiejak-Roy, Grazyna

Abstract

We look beyond the well-studied issues of fair compensation, regulatory takings, and seller-induced holdout that arise in the government purchase of land for economic development. We argue that political rivalry distorts land acquisition negotiations between private sellers and a private buyer driven by profits.
We determine these distortions endogenously and characterise conditions when the buyer’s optimal design to acquire land generates holdout. We analyse how bureaucratic corruption that increases transaction costs affects the degree and direction of political distortions and the incidence of holdout. We find that the size of corruption has nuanced nonmonotonic influences on holdout, seller welfare, and buyer’s profits.

• Journal Article Type: Article
• Acceptance Date: Sep 16, 2021
• Online Publication Date: Jul 26, 2021
• Publication Date: Jul 26, 2021
• Deposit Date: Apr 4, 2022
• Journal: Journal of Institutional and Theoretical Economics
• Print ISSN: 0932-4569
• Electronic ISSN: 1614-0559
• Publisher: Mohr Siebeck
• Peer Reviewed: Peer Reviewed
• Volume: 177
• Issue: 3
• Pages: 261-298
• DOI: https://doi.org/10.1628/jite-2021-0012
• Keywords: Economics and Econometrics
• Public URL: https://uwe-repository.worktribe.com/output/9210260
• Related Public URLs: https://researchportal.bath.ac.uk/en/publications/institutional-imperfections-and-buyer-induced-holdout-in-land-acq