A Simple Auction Mechanism for the Optimal Allocation of the Commons
Juan-Pablo Montero
|
| Article Citation |
Montero, Juan-Pablo. 2008. "A Simple Auction Mechanism for the Optimal Allocation of the Commons." American Economic Review, 98(1): 496–518.
DOI:10.1257/aer.98.1.496
|
| Abstract |
Efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators (e.g., cost of pollution abatement). This paper proposes a simple 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 rapidly decrease with the number of firms, are such that truth-telling is a dominant strategy regardless of whether firms behave non-cooperatively or collusively. The mechanism also provides firms with incentives to invest in socially optimal R&D. (JEL D44, L51, Q21)
|
| Article Full-Text Access |
|
| Authors |
Montero, Juan-Pablo (Pontifical Catholic U Chile, Santiago and Center for Energy and Environmental Policy Research, MIT)
|
| JEL Classifications |
D44: Auctions
L51: Economics of Regulation
|
|
|
|
(pp. 5 - 37)