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Obstacles to redistribution through markets and one solution

Author

Listed:
  • Roy Allen

    (University of Western Ontario)

  • John Rehbeck

    (The Ohio State University)

Abstract

Dworczak et al. (Econometrica 89:1665–1698, 2021) study when certain market structures are optimal for agents with linear preferences and bivariate preference heterogeneity. The optimal market structure requires the social planner to know the joint distribution of the value of the good and marginal value of money. We show that the features of the distribution needed to characterize optimal market structure cannot be identified from standard demand data where probability of purchase depends only on observed price. While this is a negative result, we show that the distribution for the value of the good and marginal utility of money can be fully identified when there is an observed measure of quality that can serve as a benchmark to make utility comparisons.

Suggested Citation

  • Roy Allen & John Rehbeck, 2023. "Obstacles to redistribution through markets and one solution," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(2), pages 235-242, October.
    • Handle: RePEc:spr:etbull:v:11:y:2023:i:2:d:10.1007_s40505-023-00255-5
    DOI: 10.1007/s40505-023-00255-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand; Identification; Revealed preference;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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