IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v39y2008i1p283-304.html
   My bibliography  Save this article

Optimal choice of characteristics for a nonexcludable good

Author

Listed:
  • Isabelle Brocas

Abstract

In this model, a principal decides whether to produce one indivisible good and which characteristics it contains. Agents are differentiated along two substitutable dimensions: a vertical parameter that captures their valuation for the good, and a horizontal parameter that captures their disutility when the characteristics are distant from their preferred ones. When valuations are private information, the principal produces a good with characteristics more on the lines of the preferences of the agent with the lowest valuation. Under asymmetric information on the horizontal dimension, the principal biases the decision in favor of the agent who incurs the highest disutility.

Suggested Citation

  • Isabelle Brocas, 2008. "Optimal choice of characteristics for a nonexcludable good," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 283-304, March.
    • Handle: RePEc:bla:randje:v:39:y:2008:i:1:p:283-304
    DOI: 10.1111/j.1756-2171.2008.00014.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1756-2171.2008.00014.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1756-2171.2008.00014.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-641, June.
    3. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
    4. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    5. Lockwood, Ben, 2000. "Production Externalities and Two-way Distortion in Principal-multi-agent Problems," Journal of Economic Theory, Elsevier, vol. 92(1), pages 142-166, May.
    6. Bruce W. Hamilton, 1975. "Zoning and Property Taxation in a System of Local Governments," Urban Studies, Urban Studies Journal Limited, vol. 12(2), pages 205-211, June.
    7. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    8. Tirole, Jean, 1986. "Procurement and Renegotiation," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 235-259, April.
    9. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, May.
    10. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
    11. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
    12. Tracy R. Lewis & David E.M. Sappington, 1991. "Incentives for Monitoring Quality," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 370-384, Autumn.
    13. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    14. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
    15. Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 337-388.
    16. Cornelli, Francesca, 1996. "Optimal Selling Procedures with Fixed Costs," Journal of Economic Theory, Elsevier, vol. 71(1), pages 1-30, October.
    17. Maggi G. & Rodriguez-Clare A., 1995. "On Countervailing Incentives," Journal of Economic Theory, Elsevier, vol. 66(1), pages 238-263, June.
    18. Wildasin, David E., 1979. "Local public goods, property values, and local public choice," Journal of Urban Economics, Elsevier, vol. 6(4), pages 521-534, October.
    19. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brocas, Isabelle, 2014. "Countervailing incentives in allocation mechanisms with type-dependent externalities," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 22-33.
    2. Brocas, Isabelle, 2013. "Selling an asset to a competitor," European Economic Review, Elsevier, vol. 57(C), pages 39-62.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manimay Sengupta, 1996. "Informed Planner, Decentralized Decisions And Incentive Compatibility," Discussion Paper Series 12, School of Economics, Kwansei Gakuin University, revised Oct 1996.
    2. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    3. Mathurin Founanou & Zaka Ratsimalahelo, 2016. "Regulation of Microfinance Institutions in Developing countries: an incentives theory approach," Working Papers hal-01376900, HAL.
    4. Peter Bogetoft & Kurt Nielsen, 2002. "DEA Based Yardstick Competition in Natural Resource Management," CIE Discussion Papers 2002-04, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    5. Noldeke, Georg & Samuelson, Larry, 2007. "Optimal bunching without optimal control," Journal of Economic Theory, Elsevier, vol. 134(1), pages 405-420, May.
    6. Antonio Acconcia & Riccardo Martina & Salvatore Piccolo, 2008. "Vertical Restraints Under Asymmetric Information: On The Role Of Participation Constraints," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 379-401, June.
    7. Philippe Jehiel & Benny Moldovanu, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Levine's Bibliography 784828000000000490, UCLA Department of Economics.
    8. Drew Fudenberg, 2015. "Tirole's Industrial Regulation and Organization Legacy in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 771-800, July.
    9. Doh Shin Jeon, "undated". "Relying on the agent in charge of production for project evaluation," Economics Working Papers 623, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2006.
    10. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    11. Lau, Stephanie, 2011. "Investment incentives in bilateral trading," Games and Economic Behavior, Elsevier, vol. 73(2), pages 538-552.
    12. Strausz, Roland, 2006. "Deterministic versus stochastic mechanisms in principal-agent models," Journal of Economic Theory, Elsevier, vol. 128(1), pages 306-314, May.
    13. David Rietzke & Yu Chen, 2020. "Push or pull? Performance‐pay, incentives, and information," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 301-317, March.
    14. Quintero Jaramillo, Jose E., 2004. "Liquidity constraints and credit subsidies in auctions," DEE - Working Papers. Business Economics. WB wb040604, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    15. Luis Garicano & Tano Santos, 2004. "Referrals," American Economic Review, American Economic Association, vol. 94(3), pages 499-525, June.
    16. Martin Peitz & Dongsoo Shin, 2020. "Distorted Input Ratios in Vertical Relationships," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1480-1509, October.
    17. Philippe Jehiel & Laurent Lamy, 2018. "A Mechanism Design Approach to the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 735-760.
    18. repec:cte:werepe:we081207 is not listed on IDEAS
    19. Jan Boone & Christoph Schottmüller, 2016. "Procurement with specialized firms," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 661-687, August.
    20. Emmanuelle Auriol & Pierre M. Picard, 2009. "Government Outsourcing: Public Contracting with Private Monopoly," Economic Journal, Royal Economic Society, vol. 119(540), pages 1464-1493, October.
    21. Escobar, Juan F. & Pulgar, Carlos, 2017. "Motivating with simple contracts," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 192-214.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:39:y:2008:i:1:p:283-304. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.