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REDISTRIBUTION THROUGH MARKETS

Dworczak, Piotr ; Kominers, Scott Duke ; Akbarpour, Mohammad

Econometrica, 2021-07, Vol.89 (4), p.1665-1698 [Periódico revisado por pares]

Evanston: Wiley

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  • Título:
    REDISTRIBUTION THROUGH MARKETS
  • Autor: Dworczak, Piotr ; Kominers, Scott Duke ; Akbarpour, Mohammad
  • Assuntos: Allocative efficiency ; Inequality ; Markets ; Mechanism design ; Money ; Payments ; Policy making ; Price regulations ; Prices ; Rationing ; Redistribution ; Taxation ; Valuation ; Wage & price controls ; welfare theorems
  • É parte de: Econometrica, 2021-07, Vol.89 (4), p.1665-1698
  • Descrição: Policymakers frequently use price regulations as a response to inequality in the markets they control. In this paper, we examine the optimal structure of such policies from the perspective of mechanism design. We study a buyer-seller market in which agents have private information about both their valuations for an indivisible object and their marginal utilities for money. The planner seeks a mechanism that maximizes agents’ total utilities, subject to incentive and market-clearing constraints. We uncover the constrained Pareto frontier by identifying the optimal trade-off between allocative efficiency and redistribution. We find that competitive-equilibrium allocation is not always optimal. Instead, when there is inequality across sides of the market, the optimal design uses a tax-like mechanism, introducing a wedge between the buyer and seller prices, and redistributing the resulting surplus to the poorer side of the market via lump-sum payments. When there is significant same-side inequality that can be uncovered by market behavior, it may be optimal to impose price controls even though doing so induces rationing.
  • Editor: Evanston: Wiley
  • Idioma: Inglês
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