•A new mechanism is proposed to mitigate the holdout problem in land assembly.•A 2X2 treatment structure is used to experimentally investigate the effects of two parameters that define the mechanism.•The efficiency performance of the mechanism is found to be better than a baseline market mechanism.•The incentive compatibility and individual rationality performance of the treatments are also studied. Market mechanisms for land assembly problems suffer from a holdout problem and coercive legal solutions like eminent domain introduce new inefficiencies. A new mechanism that is not fully market-based but attempts price discovery is proposed, experimentally studied and is shown to improve efficiency. The mechanism is fully specified by two parameters - a percentile value of the empirical distribution of ask-prices that serves as a trading threshold for the buyer and a quantum of penalty to be applied to landowners who bid relatively very high. In a 2 × 2 treatment, it is found that reducing the trading threshold and increasing the penalty improves the efficiency performance.