Compulsory Purchase – Reasonable and Fair Compensation

Authors

• Thomas Kalbro
• Hans Lind

Keywords:

Compulsory purchase, expropriation, compensation, profit-sharing, bargaining experiments

Abstract

Swedish law provides that compensation for compulsory purchase – in some cases – shall be decided according to the following general principle: The compensation should correspond to the price that could have been expected if it had been a "normal voluntary transaction". However, in those specific situations where compulsory purchase applies, there is always a lack of empirical data of price levels in voluntary agreements. In this article we enlighten the problem through bargaining experiments with buyers and sellers. We provide experimental evidence from Sweden indicating that the price level – or the profit-sharing between buyer and seller – depends on the context and what is judged to be reasonable principles of fair distribution.