Institutional imperfections and buyer-induced holdout in land acquisition

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

Research output: Contribution to journalArticlepeer-review

Abstract

We look beyond the well-studied issues of fair compensation, regulatory tak-ings, 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 di-rection 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.

Original languageEnglish
Pages (from-to)261-298
Number of pages38
JournalJournal of Institutional and Theoretical Economics
Volume177
Issue number3
DOIs
Publication statusPublished - 26 Jul 2021

Keywords

  • Buyer-induced holdout
  • Institutional im-perfections
  • Land acquisition for private profits
  • Political rivalry

ASJC Scopus subject areas

  • Economics and Econometrics

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