It seems to me that some are operating under the so-called “nirvana fallacy,” believing that everything must be perfect in a free market economy. Everything must be so perfect that there can be no problems that are overcome by private and voluntary initiative. LOL.
Ok. Free market options akin to the ones I and Tex and Block suggested will serve to economize the process of “land assembly” in the face of holdouts. If there are no good options beside the land the developer wants, then perhaps a high selling price is called for. I doubt many such projects would fail because of high transaction costs. If the project is so urban or specialized that there are no good options, then the payout would likely swamp the transaction costs of making the deal.
Whether or not there is a “holdout problem” is kinda irrelevant. There are holdouts, be they a problem or not.
That is complete economic nonsense.
First and foremost, you can not say a priori what would have occurred. That is enough to dismiss your entire OP out the window.
Second, you can not decide what is mutually beneficial.
Third, the very fact that the transaction does not occur is enough to dismiss any assumption that there is mutual benefit.
As far as economic analysis is concerned, the only intelligent definition of a mutually beneficial transaction is when there is no coersion and the transaction actually occurs.
What if these people truly do not want to see the road built at that price? We may observe the same behavior on their part.
Either you misunderstand the concept of “options,” or you didn’t read my OP, or I don’t understand what you’re saying in this post. The OP was about using options to overcome the holdout problem.
I don’t think I am?
Of course I cannot decide what is mutually beneficial. The holdout problem (properly understood) is about when the parties involved realize that they’re engaging in a mutually beneficial transaction, but the transaction ultimately does not go through because of a failure on the sellers’ side.
If the transaction does not occur, you could say that the transaction costs made it unprofitable/not mutually beneficial. Which makes us return to the original focus of this thread - how can the transaction costs be reduced THROUGH PRIVATE, VOLUNTARY INITIATIVE VIA THE FREE MARKET in order to make this transaction go through, be profitable and mutually beneficial? And that is answered in the OP.
Well then it’s obviously not a holdout problem. It’s obviously not a problem at all.
A quick note to anyone posting in this thread: make sure you actually read the OP before criticizing some phantom menace you imagined.
A quick note to anyone posting in this thread: we are not studying Keynesionomics and we are not studying Readingthemindsofcustmersology either.
I understand it very clearly and what you are failing to understand is that the formulation of the holdout problem implies that YOU know what is mutually beneficial.
The holdout problem does not belong in the realm of economics. It belongs in the realm of mind-readers and magicians.
Few years ago I remember coming across a situation similiar to this. Wal-Mart wanted to develop right where this one house stood, and the guy refused to sell. I don’t remember the outcome, but when it comes to something like this, and you know that Wal-Mart could afford any (somewhat) logical price, you’ll easily push up the price you’re willing to sell for beyond the actual worth. Let’s say the house/land you own is worth $250,000, and where you live is pretty much isolated from any residential area, you have no neighbors. Someone wants a majority of that land, but you happen to be in the way, you know it’s a burden on them that you’re there, so you make the best of it and push the price up. What I see as a defining point is that it’s not just someone who plans to develop the land for whatever use, that may be obvious, but knowing exactly who and what it’s for makes you push up the price, as the land will be profitable for them, so you want to make it even more profitable for yourself.
I could see a few individuals working together, let’s say you have no more than 5. A developer could work with those individuals, but when you have 50, 100, or more, the situation is even more complex and could be nearly impossible if they all know your intentions. The best situation for the developer is to have a third party purchase the land (in a sense, someone who seems harmless and not “evil” according to this land owner). Let the third party sell the land to the developer.
Another hypothetical would be: let’s say a developer went the route of having third parties purchase all the land he needed, and now he develops, what if all those individuals tried to boycott in some way based that they were deceived in selling their land to a third party when none of them knew the real intentions of the developer? I already know the answer, as no crime is committed, but I know this is a possible reaction to this type of scenario.