Concordance among Holdouts

A holdout problem arises when a disparately-owned good is desired by a prospective buyer only in its entirety, as in land assembly. Market design is crucial, as fully respecting property rights of many sellers eventually eliminates all trade. We propose a Concordance principle, inspired by Cournot (1838)’s theory of concours de producteurs: divide profits by exogenously and impose a Pigouvian tax. This protects collective, and approximate individual, property rights while solving the holdout problem and, asymptotically, achieving full efficiency. While melding Concordance with most standard auction procedures encourages truth-telling, we advocate the straightforward Vickrey-Clarke-Groves rule, augmented by a tax refund approximating budget balance. Please do not circulate or cite this preliminary and incomplete draft without the authors’ permission, but please do send any comments you have. ∗Weyl is grateful to the Centro de Investigación Económica at the Instituto Tecnológico Autónomo de México (CIE-ITAM) which hosted him on a visit while he conducted parts of this research. Kominers and Weyl respectively acknowledge the support of the National Science Foundation and the Harvard Milton Fund. Both authors additionally acknowledge the Harvard Real Estate Academic Initiative’s support of the excellent research assistance of Stephanie Lo, Balaji Narain and Will Weingarten. Both appreciate useful comments on this research supplied by Susan Athey, Andy Eggers, Noam Elkies, Edward Glaeser, Andrei Gomberg, Jerry Green, Jo Guldi, John Hatfield, Michael Herzfeld, Sonia Jaffe, Pam Jorgensen, Daniel Kelly, Evan Kwerel, Greg Lewis, Michael Ostrovsky, Parag Pathak, Al Roth, David Salant, Tridib Sharma, Andrei Shleifer, Joe Singer, Henry Smith and especially Ted Bergstrom, Eric Budish and Andy Eggers, as well as seminar participants at Harvard University, the University of Chicago, and especially the University of California, Santa Barbara. †Department of Economics, Harvard University, and Harvard Business School: Baker Library 420C, Soldiers Field, Boston, MA 02163: [email protected]. ‡Harvard Society of Fellows: 78 Mount Auburn Street, Cambridge, MA 02138, USA: [email protected].