A Simple Auction Mechanism for the Optimal Allocation of the Commons

S-Tier
Journal: American Economic Review
Year: 2008
Volume: 98
Issue: 1
Pages: 496-518

Score contribution per author:

8.043 = (α=2.01 / 1 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

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)

Technical Details

RePEc Handle
repec:aea:aecrev:v:98:y:2008:i:1:p:496-518
Journal Field
General
Author Count
1
Added to Database
2026-01-26