Price discovery is easy. Every domain is available once a year. Anyone can bid. If you want to keep the domain, you pay 1% of the highest bid, otherwise the bidder gets it (they have to put in the money to secure the bid).

The only downside is that well capitalized bidders could harass small owners with outsized bids, if they were willing to possibly end up with ownership.

Agree, but economists do have a solution for this problem. Self-assess the value and pay taxes based on that value. If someone/the government makes an offer that is some percentage greater than that value, you must sell.

Sounds like a solution only an econ could think up of, which doesn't take into consideration other external factors that would apply specifically to the person holding the property, such as: - human psychology (loss aversion, endowment effect, mental anxiety due to risk of being forced to sell your property) - switching costs (monetary, mental, time spent searching for alternatives, costs to moving to something else) - replacement costs (transaction costs, etc)