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Robust Market Interventions

Author

Listed:
  • Galeotti, A.
  • Golub, B.
  • Goyal, S.
  • Talamas, E.
  • Tamuz, O.

Abstract

A large differentiated oligopoly yields inefficient market equilibria. An authority with imprecise information about the primitives of the market aims to design tax/subsidy interventions that increase efficiency robustly—i.e., with high probability. We identify a condition on demand that guarantees the existence of such interventions, and we show how to construct them using noisy estimates of demand complementarities and substitutabilities across products. The analysis works by deriving a novel description of the incidence of market interventions in terms of spectral statistics of Slutsky matrices. Our notion of recoverable structure ensures that parts of the spectrum that are useful for the design of interventions are statistically recoverable from noisy demand estimates.

Suggested Citation

  • Galeotti, A. & Golub, B. & Goyal, S. & Talamas, E. & Tamuz, O., 2024. "Robust Market Interventions," Cambridge Working Papers in Economics 2456, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2456
    Note: sg472
    as

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    References listed on IDEAS

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    4. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
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