Free riders, holdouts, and public use: a tale of two externalities
- Thomas J. Miceli
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Free riders and holdouts are distinct market failures that potentially impede the completion of otherwise beneficial transactions. The key difference is that the free rider problem is a demand side externality that requires taxation to compel payment for a public good, while the holdout problem is a supply side externality that requires eminent domain to force the sale of land for large scale projects. This paper highlights the distinction between these two problems and uses the resulting insights to clarify the meaning of the public use requirement of the Fifth Amendment takings clause.
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- Free riders, holdouts, and public use: a tale of two externalities
Volume 148, Issue 1-2 , pp 105-117
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Eminent domain
- Free riders
- Public use
- Industry Sectors
- Thomas J. Miceli (1)
- Author Affiliations
- 1. Department of Economics, University of Connecticut, Storrs, CT, 06269-1063, USA