Revelation Mechanisms and Allocative Efficiency

16 Pages Posted: 14 May 2020

See all articles by Florenz Plassmann

Florenz Plassmann

SUNY at Binghamton, Department of Economics

T. Nicolaus Tideman

Virginia Tech - Department of Economics

Date Written: October 2019

Abstract

We show that revelation mechanisms affect owners' valuations of the assets they own and that different mechanisms provide owners with the incentive to reveal—truthfully—different valuations. Self‐assessment of property with compulsory sale at the self‐assessed price is the only known mechanism that promotes allocative efficiency by providing efficient incentives for transferring property to those who value it most. We introduce two modifications of the standard self‐assessment mechanism that maintain full incentives to invest and raise as much public revenue as can be raised efficiently.

JEL Classification: D61, D82, H21, K11

Suggested Citation

Plassmann, Florenz and Tideman, T. Nicolaus, Revelation Mechanisms and Allocative Efficiency (October 2019). Economic Inquiry, Vol. 57, Issue 4, pp. 2147-2162, 2019, Available at SSRN: https://ssrn.com/abstract=3596394 or http://dx.doi.org/10.1111/ecin.12799

Florenz Plassmann (Contact Author)

SUNY at Binghamton, Department of Economics ( email )

Binghamton, NY 13902-6000
United States
607-777-4304 (Phone)

T. Nicolaus Tideman

Virginia Tech - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States

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