Question

Evaluate the following interpretation of the Poletown decision: "The bargaining costs between GM and the neighbors are so high that, even if the valuation of GM’s desire to use their property was greater than the valuation on the neighbors’ desire to remain where they were, no bargain could have been struck. What the court is sanctioning here is a hypothetical market transaction that would have taken place but for the level of transaction costs."

Answer 1

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Step-by-step explanation:

Bargaining costs are normally on the high side when a great number of individuals are involved, as well as when the negotiations involve something that people are not ready to think rationally about and equate or liken to a monetary value. So yes, this position could absolutely be defended.

on the other hand, there is no obvious way to show that the land is really of more value to GM than to the residents, which means, there is no way to certainly verify that GM would have been successful in purchasing the land if there weren't transaction costs. This would actually depend in great part on the other options that are available to GM (where else in Detroit they possibly will have constructed a new plant).