The Contest Winner: Gifted or Venturesome?

This paper examines the chance of winning a Tullock-contest when participants differ in both their talent and their attitude towards risk. For the case of CARA preferences, it is shown that the winning probability may be higher for a low-skilled agent with a low degree of risk aversion than for a high-skilled agent with a high degree of risk-aversion. Such an outcome often is undesirable. It will occur if and only if the agents’ ratio of degrees of risk aversion is larger than their ratio of skill levels and the rent of the contest is sufficiently high.selection contest, asymmetric players, risk aversion

Informative Voting and the Samuelson Rule

We study the classical free-rider problem in public goods provision in a large economy with uncertainty about the average valuation of the public good. Individual preferences over public goods are shaped by a skill and a taste parameter. We use a mechanism design approach to solve for the optimal utilitarian provision rule. The relevant incentive constraints for information aggregation ensure that individuals behave as if they were engaging in informative voting over the level of public good provision. It is shown that the use of information by an optimal provision rule is inversely related to the polarization of preferences which results from the properties of the skill distribution

Why were FIFA World Cup Tickets so cheap?

We examine the pricing decision of a multi-product monopolist in a two-sided market where the type structure of buyers on one side of the market is an important determinant of profit on the other side. In this situation it might be optimal to set prices below the maximum sellout price and to ration demand by a random mechanism in the first market to reach a type distribution more favorable for sales in the other market. The model establishes demand quality as an alternative link between markets in addition to standard quantitative effects and explains frequently observed underpricing, e.g. in the (sports) entertainment industry. It also provides an explanation for the effort a monopolist incurs to deter from resale

Why were FIFA World Cup Tickets so cheap?

We examine the pricing decision of a multi-product monopolist in a two-sided market where the type structure of buyers on one side of the market is an important determinant of profit on the other side. In this situation it might be optimal to set prices below the maximum sellout price and to ration demand by a random mechanism in the first market to reach a type distribution more favorable for sales in the other market. The model establishes demand quality as an alternative link between markets in addition to standard quantitative effects and explains frequently observed underpricing, e.g. in the (sports) entertainment industry. It also provides an explanation for the effort a monopolist incurs to deter from resale.Underpricing; Demand Rationing; Resale Deterrence

Informative Voting and the Samuelson Rule

We study the classical free-rider problem in public goods provision in a large economy with uncertainty about the average valuation of the public good. Individual preferences over public goods are shaped by a skill and a taste parameter. We use a mechanism design approach to solve for the optimal utilitarian provision rule. The relevant incentive constraints for information aggregation ensure that individuals behave as if they were engaging in informative voting over the level of public good provision. It is shown that the use of information by an optimal provision rule is inversely related to the polarization of preferences which results from the properties of the skill distribution.information aggregation; informative voting; public goods; two-dimensional heterogeneity

Optimal Democratic Mechanisms for Taxation and Public Good Provision

We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.Public goods, optimal taxation, two-dimensional heterogeneity, asymmetric information

Essays in Public Economic Theory

Capital Gains Taxation; Lock-in Effect; Public Good Provision; Informative Voting

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Für die Fußball-Weltmeisterschaft 2006 wurde ein Vielfaches der verfügbaren Karten bestellt. Welche dieser Bestellungen zum Zuge kommen, wurde nun Mitte April per Losverfahren entschieden. Ist diese Allokation der Karten effizient? Welche Motive bestimmten diese Verkaufsstrategie? --