Consider the model of land assembly

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Consider the model of land assembly (under the topic Eminent Domain). Suppose, at each stage of negotiation between the property owners and the buyer, the owner can extract α fraction of the net total surplus/gains from transaction at hand. (Note: the class room model, α = 1/2).

(a) Does α affect outcome - whether project will be taken up or not? How?

(b) Does an increase in the bargaining power of the buyers, i.e., increase value of α, increase or reduce the set of projects that will be successful? Prove your claims.

Reference no: EM131092394

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