تصاحب دارایی واقعی: استفاده از تئوری گروسمن و هارت
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : International Review of Financial Analysis, Volume 9, Issue 2, Summer 2000, Pages 175–195
In this article, I adopt a corporate takeover model to the problem of a developer who wants to renew an urban neighborhood. The problem outlined is a combination of the problems addressed by Grossman and Hart (1980)(. The Bell Journal of Economics 11, 42–64) and Shleifer and Vishny (1986)(. Journal of Political Economy 94, 461–488) in the corporate control literature. The relevant corporate story concerns value-improving monitoring performed by shareholders. Even though monitoring increases the value of the company for each investor, no shareholder would be willing to do it because there is an externality involved. Translating this into the language of urban redevelopment, no homeowner would do any improvement in the neighborhood unless he or she can internalize the benefit. The story in the urban renewal framework is more complicated. These property owners may differ in their valuation of even otherwise identical units since the owners may have different attachments to the neighborhood. I address some of these problems and also introduce the notion of dilution as the participating government agency's ability to force initial residents to sell to the developer or comply with costly new standards for development. Dilution increases the costs to potential holdouts.
The motivation behind this article is a footnote in Grossman and Hart (1980) on the theory of takeover bids. In this article I extend their model and use a subgame perfect approach to the problem of a developer who wants to renew an urban neighborhood. The problem outlined in this article is a combination of the problems addressed by Grossman and Hart (1980) and by Shleifer and Vishny (1986) in the corporate control literature. The relevant corporate story of Shleifer and Vishny concerns value-improving monitoring performed by others. Translated into the language of urban redevelopment, no homeowner would do any improvement in the neighborhood unless he or she can internalize the benefit from so doing. Even though monitoring increases the value of the company for each investor, no shareholder would be willing to do it because there is an externality involved: those who do not monitor enjoy the benefit of monitoring would do any improvement in the neighborhood unless he or she can internalize the benefit. Grossman and Hart (1980) address whether there is any incentive for a raider to initiate costly takeovers. In a model of atomistic shareholders, the authors find that costly takeovers may not be initiated unless shareholders agree to a post-takeover dilution of their shares to compensate the raider for the takeover cost. The reason is that shareholders will only be willing to trade at a price equal to the post-takeover value and the minority shareholders will free-ride on the value improvement. As a result the raider will not be able to recover even the cost of making a tender offer to profit from secretly purchasing shares before the tender offer. The story in the urban renewal framework is more complicated. These property owners may differ in their valuation of even otherwise identical units since the owners may have different attachments to the neighborhood. In my article, I introduce the notion of dilution as the participating government agency's ability to force initial residents to sell to the developer or comply with costly new standards for development. Dilution increases the costs to potential holdouts. Since the publication of Davis and Whinston (1961) and Schall (1976) in a related area, I have not come across any article addressing the problem of urban renewal using a corporate finance and/or game theoretic model. I follow Milgrom and Roberts (1982) article on limit pricing and entry and use a subgame perfect approach under complete but imperfect information in the game. At the policy level, my research intends to develop a corporate finance game theoretic model to describe a broad range of urban redevelopment projects. It can also help in predicting the outcomes of real estate takeovers by developers, and evaluate the effectiveness and appropriateness of their using dilution (a privatized eminent domain in the context of urban renewal) in the process. In the absence of direct public intervention, urban redevelopment is in essence private investment in public goods. While Pareto improvement could be achieved by such undertaking, the “unexcludibility” of public goods tends to provide incumbent property owners incentives for free-riding on the improvements and results in “holdout” problems that often hinder successful redevelopment. Certainly the government could step in whenever holdouts occur and exercise its power of eminent domain to wipe them out, but in so doing it will invite skepticism about its impartiality. Leaving alone public intervention, could we solve the holdout problem by market mechanisms? To this date, no satisfactory answer has been offered in the urban or land economics literature. My article, in fact, does just that and also addresses some of the above questions. This article also provides an analytical framework for studying a broad range of privatized urban redevelopment by organizing sales of real estate property at par with sales of stocks for a corporation.
نتیجه گیری انگلیسی
Bagnoli and Lipman (1988), Hirshleifer and Titman (1990), and Deman 1991 and Deman 1994 have argued that the Grossman and Hart characterization of the real world of pure strategy equilibria seems to be somewhat unrealistic. Hence, the extreme cases of pure strategy equilibria are more likely to be found in real estate takeovers than in the market for corporate control. The assumption of either impotent managers or complete absence of management is also more consistent with the real estate market than market for corporate control. We have developed a game theoretic model of urban property takeovers and have shown that there exists a pure strategy symmetric equilibrium. It is possible to realize this pure strategy symmetric equilibrium. A coherent approach to interference by way of exercising the right of eminent domain has been discussed. The possibility of taking over urban property or plots of land by an inefficient developer in the name of either urban renewal or site assembly is not completely ruled out. Hence, the applications of eminent domain, such as urban renewal, are often either (a) socially inefficient, but beneficial to selected individuals or group at the expense of others, or (b) socially inefficient because the owners are truly harmed by the use of eminent domain if their dwelling and surrounding neighborhood are really worth to them more than the “just compensation” allowed by the courts. The main conclusion of the paper is that the threat of takeover can facilitate a redevelopment program undertaken by a developer even though the equilibria are straightforward in a finitely many players' game for the reasons stated above. I also show that the developer faces a trade-off between a low bid price and a high probability of takeover. However, the probability of takeover can be enhanced by the provision of dilution or exercise of right to eminent domain. This article makes a useful application of game theory and corporate finance to address policy issues of dilution, eminent domain, slum equilibria, and other urban renewal problems. Paper also provides evidence in favor of how the market for development purchases should be organized. In fact, it seems like a potentially interesting idea and it might even be possible for a local government to adopt such a rule. To minimize abuse of right of eminent domain by the government and to enhance the effectiveness of using eminent domain as a threat by the developer, I introduce a democratic (50% yes vote) or super majority rule in the model (to pass a constitutional test). These results are significantly different from those already published and will appeal to a wider audience from finance, industrial organization, game theory, and urban economics. It would also contribute to ongoing debate on the subject of takeovers. I believe the limiting case of the finite owner model—as the number of owners tend to infinity—differs from the continuum case. However, it can be shown that a finitely many player model with noise will give the same results as the continuum of players model. A generalization of such a model is not difficult, but preliminary results may be useful in formulating public policies regarding privatization of urban renewal efforts