Holdups and holdouts
DOI link for Holdups and holdouts
Holdups and holdouts book
This chapter demonstrates a relationship between the "holdup" and "holdout" problems. It examines the legal and economic responses to the two problems in light of their similarity. To illustrate the holdup problem, the chapter provides the case of Goebel v. Linn. To illustrate the holdout problem, it gives the controversial Supreme Court case of Kelo v. City of New London. The inefficiency in both cases stems from the ability of the "input" supplier to bargain over the price of the input after the buyer has committed resources to the project. The key to eliminating this inefficiency, therefore, is to remove the supplier's ability to bargain at that point in time. The chapter further provides the case of Boomer v. Atlantic Cement Co., which is especially interesting in the current context because it has been interpreted by different authors as involving either a holdup or a holdout problem.