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Optimal choice of characteristics for a nonexcludable good

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  • 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
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    References listed on IDEAS

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    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.

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    More about this item

    JEL classification:

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

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