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Abstract

This paper quantitatively examines by simulation the extent to which plot exchange can consolidate fragmented farmland. We first show that individual, decentralized, one-to-one plot exchanges, which are currently conducted by some leading farmers, cannot accomplish sufficient consolidation. This is because the occurrence of "double-coincidence-of-wants" that is necessary for voluntary exchange is too rare. We then propose a collective, centralized approach, based on the top trading cycle algorithm by Shapley et al., in which many farmers simultaneously exchange plots. This approach mitigates the restriction of "double-coincidence-of-wants" and can raise the consolidation rate by more than twice than that of the individual-decentralized exchange. We also find that the consolidation rate improves dramatically as more farmers participate in the exchange. Our results suggest that it is essential to attract as many farmers as possible and to conduct collective and centralized allocation of plots in order to attain better consolidation.

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