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We use a novel tax mechanism – ‘rejected offer reassessment’ (ROR) – in laboratory experiments to discourage seller holdout and facilitate land assembly. Under this mechanism, if a landowner rejects a developer’s offer, his taxable property value is reassessed to be equal to the rejected offer, increasing his taxes. We find that, relative to a control treatment, ROR discourages the magnitude of seller holdout (but not its frequency) and increases the rate of successful land assembly by almost 60%. It also increases the gains from trade by 22.1% relative to the control treatment, but the difference is not statistically significant.


This is an Accepted Manuscript of an article published in Applied Economics Letters, volume 26, issue 7, in 2018, available online at DOI: 10.1080/13504851.2018.1488047. It may differ slightly from the final version of record.

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Taylor & Francis