Optimal (Under-)Pricing and Allocation of Publicly Provided Goods ()
ABSTRACT
This
paper exploits the links between a private value distribution’s hazard rate,
mean residual value, and eta functions in order to characterize posted-price rules for a public agency
to allocate scarce units of an indivisible good under the utilitarian
distributional objective of maximizing expected consumer surplus. Sufficient
conditions on the monotonic and non-monotonic classes of the functions are
established that identify either market assignment at the clearing price or
lottery assignment with partial or complete under-pricing as the optimal
allocation mechanism. The results are summarized across a wide range of
parametric value distributions, and selected non-monotonic cases are evaluated
numerically to determine the relative scarcity or abundance of the good
necessary for market or non-market assignment to dominate.
Share and Cite:
Scrogin, D. (2017) Optimal (Under-)Pricing and Allocation of Publicly Provided Goods.
Theoretical Economics Letters,
7, 683-695. doi:
10.4236/tel.2017.74049.
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