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Bidding for subsidies with one's patience

Author

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  • Caspari, Gian

Abstract

We study the problem of distributing subsidies in a market that includes both marginal individuals in need of assistance and infra-marginal individuals who would purchase the subsidized product without additional incentives. We propose the use of a wait time auction, where individuals bid the amount of time they are willing to wait in exchange for a specified subsidy amount. This design enables more direct targeting of marginal individuals, thereby enhancing the overall effectiveness of the subsidy program. Furthermore, screening is costless in equilibrium as no wait times are imposed, and practical robustness against deviations from equilibrium behavior can be ensured by implementing a maximum allowable bid.

Suggested Citation

  • Caspari, Gian, 2025. "Bidding for subsidies with one's patience," ZEW Discussion Papers 25-009, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:313007
    as

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    File URL: https://www.econstor.eu/bitstream/10419/313007/1/191917754X.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Subsidies; Market Design; Auctions;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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