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The Design of an Efficient Private Industry

Author

Listed:
  • Philippe Jehiel

    (CERAS-ENPC and University College London,)

  • Benny Moldovanu

    (University of Bonn,)

Abstract

Government-sponsored auctions for production rights (e.g., license auctions, privatizations, etc.) shape the industry structure. Are there mechanisms that induce an efficient industry structure (at least when there are no positive costs to public funds)? The answer is "no" whenever firms have private information about both fixed and marginal costs. Our analysis also suggests that the second-best industry may either be more competitive or more monopolistic than the first-best one. These insights are in sharp contrast with the ones obtained for models where firms have one-dimensional private information, thus requiring more delicate policy recommendations. (JEL: D43, D45, D82, L1) Copyright (c) 2004 The European Economic Association.

Suggested Citation

  • Philippe Jehiel & Benny Moldovanu, 2004. "The Design of an Efficient Private Industry," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 516-525, 04/05.
    • Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:516-525
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    Citations

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    Cited by:

    1. Sengupta, Abhijit & Tauman, Yair, 2011. "Inducing efficiency in oligopolistic markets with increasing returns to scale," Mathematical Social Sciences, Elsevier, vol. 62(2), pages 95-100, September.
    2. Axel Gautier & Manipushpak Mitra, 2008. "Regulation of an Open Access Essential Facility," Economica, London School of Economics and Political Science, vol. 75(300), pages 662-682, November.
    3. Aniruddha Bagchi, 2008. "Selling licences for a process innovation: the impact of the product market on the selling mechanism," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 1015-1045, August.
    4. Jehiel, Philippe & Moldovanu, Benny, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 142, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    5. GAUTIER, Axel, 2005. "Network financing with two-part and single tariff," LIDAM Discussion Papers CORE 2005034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Yan, Haomin, 2020. "Auctions with quantity externalities and endogenous supply," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    7. Boaz Zik, 2023. "Efficient sequential screening with informational externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 567-590, February.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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