Buyers requiring large parcels of land for development purposes engage several owners in a bilateral trade seeking monetary payment in exchange for land – a business transaction most often referred to in the literature as the problem of land assembly. To avoid the holdout problem which is a typical consequence of such negotiations necessitates a good pricing strategy that meets the subjective valuation considerations of the owners and protecting property rights to warrant a fair and efficient outcome. Several approaches have been proposed in the literature that includes contributions from game theory in the form of Nash bargaining, Bayesian theory for incomplete information, auction theory and Mechanism Design which have individually enriched this field and proposed credible solutions. In this paper, we consider a setting that has a single buyer and N sellers. We take a Mechanism Design approach to study the assembly problem in a utilitarian framework, where we associate risk-averse utility functions with the sellers. Given a set of reserve prices reported by sellers, and their risk-aversion behaviour, we seek an incentive-compatible mechanism that simultaneously maximizes the sum of individual expected utilities while delivering a Pareto optimal per-seller penalty-reward structure. We show how this mechanism, inspired and adapted from the actuarial Risk Exchange concept in the Insurance industry, can be fruitfully applied to the land assembly problem, yielding an efficient and optimal solution to the holdout problem, while making very minimal demands on knowledge of sellers valuations. The working of the mechanism is illustrated with a simple example.
The Journal of Real Estate Finance and Economics – Springer Journals
Published: Mar 28, 2012
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera