Underpricing In Public Lotteries: A Critique Of User-Pay And All-Pay Tariffs
Abstract"A body of literature spanning from medical ethics to public economics has amassed regarding the rationing of underpriced public resources. This study investigates the effects of price on entry, individual and aggregate expected consumer surplus, and tax revenues in user-pay and all-pay (AP) lotteries. Comparative statics indicate that expected surplus may increase (decrease) as price increases (decreases) if entry is sufficiently responsive though entry in AP lotteries is inelastic at all prices. Further, the lotteries are shown to be outcome equivalent under revenue equivalency. Selected results are evaluated numerically with simulations performed across a broad class of distributions describing individual private values. "("JEL "D45, D61, H42) Copyright (c) 2007 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 47 (2009)
Issue (Month): 3 (07)
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Find related papers by JEL classification:
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
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