Concordance among holdouts

Abstract

Holdout problems prevent decentralized aggregation of complementary goods, but the coercion required to overcome holdout may encourage abuse and violate fairness standards. We propose second-best efficiency, abuse-prevention, and fairness criteria for procedures intended to reduce holdout. Our criteria are jointly satisfied by a class of "Concordance" procedures. In these procedures, the prospective buyer makes a take-it-or-leave-it offer to the group of sellers, and the sellers use an efficient collective choice mechanism to decide as a group whether to accept the buyer's offer. In the case of sale, the buyer's offer is divided among the sellers in a fashion independent of individual sellers' actions. Each seller retains the option to receive, in the event of sale, her share of the offer (without making any additional payments) in exchange for not influencing the collective decision. Our approach is applicable in a range of contexts including land assembly, spectrum aggregation, corporate acquisitions, and patent pool formation.

Double auction for trading perfect complements

“…We let the design criteria of efficiency and collective property rights bear on the choice of r. In the next several definitions, we make these criteria precise. In discussing their approach to the holdout problem, Kominers and Weyl (2011) 5 define and adopt the notion of collective property rights as a market design criterion. We adopt a similar notion here in Definition 6 (Collective property rights).…”

“…The holdout problem is formalized by the impossibility results that point to inefficiently low sales in any market mechanism that involves voluntary trade. Kominers and Weyl (2011) summarize the literature in these words-"Property-rights-preserving mechanisms (Grossman et al, 2019) that merely eliminate strategic misrepresentation of valuations do not solve the more fundamental holdout problem. Classic market value-based takings and more efficient proposals for simple Vickrey-Clarke-Groves procedures (Plassmann et al, 2011) abrogate all semblance of property rights.…”

“…In the classic Bayesian mechanism design framework, they prove that under some regularity conditions, the maximum probability that the public good is provided in any Bayesian incentive compatible, individually rational, and budget-balanced mechanism converges to 0 as the number of agents grows unbounded. Kominers and Weyl (2011) consider this asymptotic impossibility of provision result to be the strongest manifestation of the holdout problem. Plassmann et al (2011) conducted a survey of the literature on the holdout problem and some remedial solutions in the context of the land assembly problem.…”

“…A number of recent papers take the approach of relaxing individual rationality constraints to mitigate the holdout problem. The "concordance mechanism" of Kominers and Weyl (2011) asks the buyer to make the monopsonist-optimal offer to the aggregate community of sellers which is accepted when it exceeds the total reported valuation of sellers. Sellers have an option to exert influence or not.…”

Holdup by Junior Claimholders: Evidence from the Mortgage Market

“…Mayer et al (2009a) propose a solution to the holdup problem: providing a fee to the second-lien holder to relinquish its control on the modification of the first lien. Beyond the mortgage market, a vast literature has suggested possible solutions to the holdup problem in more general settings (seeMailath and Postelwaite 1990, Posner 2005, Armour and Skeel 2007, and Kominers and Weyl 2011 …”