A Simple Auction Mechanism for the Optimal Allocation of the Commons
AbstractEfficient regulation of the commons requires information about the regulated firms that is rarely available to regulators (e.g., cost of pollution abatement). Different mechanisms have been proposed for inducing firms to reveal their private information but for reasons I discuss in the paper, I find these mechanisms of limited use. I propose a much simpler mechanism that implements the first-best for any number of firms: a uniform price sealed-bid auction of an endogenous number of (transferable) licenses with a fraction of the auction revenues given back to firms. Paybacks, which decrease with the number of firms, are such that truth-telling is a dominant strategy regardless of whether firms behave non-cooperatively or collusively.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 311.
Date of creation: 2006
Date of revision:
Other versions of this item:
- Juan-Pablo Montero, 2008. "A Simple Auction Mechanism for the Optimal Allocation of the Commons," American Economic Review, American Economic Association, vol. 98(1), pages 496-518, March.
- Juan-Pablo Montero, 2006. "A simple auction mechanism for the optimal allocation of the commons," Working Papers, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research 0608, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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