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Market Design with Correlated Valuations

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Author Info
Yongmin Chen () (University of Colorado at Boulder)
Ruqu Wang () (Queen's University)

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Abstract

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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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1034.pdf
File Format: application/pdf
File Function: First version 2005
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1034.

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Length: 34 pages
Date of creation: Sep 2005
Date of revision:
Publication status: Forthcoming in Economica
Handle: RePEc:qed:wpaper:1034

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Related research
Keywords: market structure; correlated values; market design; government revenue;

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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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    Other versions:
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    Other versions:
  7. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June. [Downloadable!] (restricted)
  8. Rosenthal, Robert W. & Wang, Ruqu, 1996. "Simultaneous Auctions with Synergies and Common Values," Games and Economic Behavior, Elsevier, vol. 17(1), pages 32-55, November. [Downloadable!] (restricted)
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  9. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November. [Downloadable!] (restricted)
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