To understand reasons for possible failures of 'good' economic reforms, we consider an institution which is always successful in making the best public decision from the utilitarian perspective. We show it is bound to introduce inequality if costs of a reform are privately known: the losers can...

Two popular selling methods are compared in a one-period correlated private-values model. The seller of an object has to decide whether to sell it by posting a fixed price or by an auction. Without auctioning costs, an auction (with a reserve price) is always preferable. With positive auctioning...

A model is presented in which market prices systematically understate fundamental values. The result follows from assumptions that the market is organized along auction lines with private information and is imperfect in that owners are occasionally forced to sell in order to raise cash for...

In this paper we study a model of rational consumption and quitting in the context of harmful addictive goods. We assume that a person has imperfect information about his ability to resist and terminate the addiction. We first characterize the optimal consumption path of a non-addicted person,...

In this article, we investigate how information revelation rules affect the existence and the efficiency of equilibria in two-round elimination contests. We establish that no symmetric separating equilibrium exists under the full revelation rule and find that the non-existence result is very...

Two popular selling methods--posted-price selling and auctions--are compared here in an independent private-values model. Without auctioning costs, auctioning is always optimal. When auctioning is costly, auctions are still preferable if the marginal-revenue curve is sufficiently steep. The...

This paper examines the role of return policies in common value auctions. We first characterize the unique symmetric equilibrium in first-price and second-price auctions with continuous signals and discrete common values when certain return policies are provided. We then examine how the return...