Revelation Mechanisms and Allocative Efficiency
16 Pages Posted: 14 May 2020
Date Written: October 2019
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: Suggested Citation