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The Design of an Efficient Private Industry

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Author Info

  • 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.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 2 (2004)
Issue (Month): 2-3 (04/05)
Pages: 516-525

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Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:516-525

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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. GAUTIER, Axel, 2005. "Network financing with two-part and single tariff," CORE Discussion Papers 2005034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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.

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