A seller decides whether to allocate an item among two potential buyers. The seller and buyer 1 interact ex post in such a way that each of them suffers a negative externality if the other possesses the item. We show that the optimal allocation rule favors buyer 2, who does not interact ex post...

I consider a model where a principal decides whether to produce one unit of an indivisible good (e.g. a private school) and which characteristics it will contain (emphasis on language or science). Agents (parents) are differentiated along two substitutable dimensions: a vertical parameter that...