The effects of information on market design are explored in a simple setting where firms have private information about their correlated fixed costs and the government aims to maximize its expected revenue conditional on achieving efficient allocations. Government revenues are higher when the costs are less correlated (or are more of a private value). The reduced correlation increases the firms' information rents, but a change in the information structure also changes the expected market structures with positive effects on government revenues. If the government faces the no-deficit constraint, there are situations where efficient allocations are achieved under asymmetric information but not under symmetric information.
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number
1034.
Yongmin Chen & Ruqu Wang, 2006.
"Market Design with Correlated Valuations,"
Economica,
London School of Economics and Political Science, vol. 73(292), pages 659-672, November.
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Find related papers by JEL classification: D4 - Microeconomics - - Market Structure and Pricing L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance H8 - Public Economics - - Miscellaneous Issues
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Riordan, Michael H, 1996.
"Contracting with Qualified Suppliers,"
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 115-28, February.