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Revelation Mechanisms And Allocative Efficiency

Author

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  • Florenz Plassmann
  • Nicolaus Tideman

Abstract

We show that revelation mechanisms affect owners' valuations of the assets they own and that different mechanisms provide owners with the incentive to reveal—truthfully—different valuations. Self‐assessment of property with compulsory sale at the self‐assessed price is the only known mechanism that promotes allocative efficiency by providing efficient incentives for transferring property to those who value it most. We introduce two modifications of the standard self‐assessment mechanism that maintain full incentives to invest and raise as much public revenue as can be raised efficiently. (JEL D61, D82, H21, K11)

Suggested Citation

  • Florenz Plassmann & Nicolaus Tideman, 2019. "Revelation Mechanisms And Allocative Efficiency," Economic Inquiry, Western Economic Association International, vol. 57(4), pages 2147-2162, October.
    • Handle: RePEc:bla:ecinqu:v:57:y:2019:i:4:p:2147-2162
    DOI: 10.1111/ecin.12799
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    More about this item

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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