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Obstacles to redistribution through markets and one solution

Author

Listed:
  • Roy Allen

    (University of Western Ontario)

  • John Rehbeck

    (The Ohio State University)

Abstract

Dworczak et al. (Econometrica 89:1665–1698, 2021) study when certain market structures are optimal for agents with linear preferences and bivariate preference heterogeneity. The optimal market structure requires the social planner to know the joint distribution of the value of the good and marginal value of money. We show that the features of the distribution needed to characterize optimal market structure cannot be identified from standard demand data where probability of purchase depends only on observed price. While this is a negative result, we show that the distribution for the value of the good and marginal utility of money can be fully identified when there is an observed measure of quality that can serve as a benchmark to make utility comparisons.

Suggested Citation

  • Roy Allen & John Rehbeck, 2023. "Obstacles to redistribution through markets and one solution," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(2), pages 235-242, October.
    • Handle: RePEc:spr:etbull:v:11:y:2023:i:2:d:10.1007_s40505-023-00255-5
    DOI: 10.1007/s40505-023-00255-5
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    References listed on IDEAS

    as
    1. Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
    2. Matthew A Masten, 2018. "Random Coefficients on Endogenous Variables in Simultaneous Equations Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 1193-1250.
    3. Piotr Dworczak & Scott Duke Kominers & Mohammad Akbarpour, 2021. "Redistribution Through Markets," Econometrica, Econometric Society, vol. 89(4), pages 1665-1698, July.
    4. Dirk Bergemann & Stephen Morris, 2012. "Robust Mechanism Design," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 2, pages 49-96, World Scientific Publishing Co. Pte. Ltd..
    5. Nathan H. Miller & Matthew C. Weinberg, 2017. "Understanding the Price Effects of the MillerCoors Joint Venture," Econometrica, Econometric Society, vol. 85(6), pages 1763-1791, November.
    6. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
    7. Matzkin, Rosa L., 1993. "Nonparametric identification and estimation of polychotomous choice models," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 137-168, July.
    8. Jeremy T. Fox, 2021. "A Note on Nonparametric Identification of Distributions of Random Coefficients in Multinomial Choice Models," Annals of Economics and Statistics, GENES, issue 142, pages 305-310.
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    Cited by:

    1. Piotr Dworczak, 2022. "Equity-efficiency trade-off in quasi-linear environments," GRAPE Working Papers 70, GRAPE Group for Research in Applied Economics.

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    More about this item

    Keywords

    Demand; Identification; Revealed preference;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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