{"title":"Market power, randomization and regulation","authors":"","doi":"10.1016/j.ijindorg.2024.103081","DOIUrl":null,"url":null,"abstract":"<div><p>This paper provides an introduction to and overview of the mechanism design approach to textbook monopoly and monopsony pricing problems. Specifically, assuming that agents are privately informed about their values and costs, it shows that the optimal selling and procurement mechanisms quite generally involve rationing, provided the underlying mechanism design problem does not satisfy the regularity assumption of <span><span>Myerson (1981)</span></span>. Rationing takes the form of underpricing in the case of a monopoly seller and of involuntary unemployment and efficiency wages in the case of a monopsony employer. The paper illustrates these phenomena, as well as the effects of price ceilings and minimum wages, with a leading example that permits closed-form solutions. It also explains why resale tends to undermine the firm's benefits from rationing without eliminating them and discusses emerging issues for the theory of regulation.</p></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"96 ","pages":"Article 103081"},"PeriodicalIF":1.7000,"publicationDate":"2024-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0167718724000365/pdfft?md5=cdf3e6883c7b012e4c8aa2ac6e4390c1&pid=1-s2.0-S0167718724000365-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Industrial Organization","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0167718724000365","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
This paper provides an introduction to and overview of the mechanism design approach to textbook monopoly and monopsony pricing problems. Specifically, assuming that agents are privately informed about their values and costs, it shows that the optimal selling and procurement mechanisms quite generally involve rationing, provided the underlying mechanism design problem does not satisfy the regularity assumption of Myerson (1981). Rationing takes the form of underpricing in the case of a monopoly seller and of involuntary unemployment and efficiency wages in the case of a monopsony employer. The paper illustrates these phenomena, as well as the effects of price ceilings and minimum wages, with a leading example that permits closed-form solutions. It also explains why resale tends to undermine the firm's benefits from rationing without eliminating them and discusses emerging issues for the theory of regulation.
期刊介绍：
The IJIO is an international venture that aims at full coverage of theoretical and empirical questions in industrial organization. This includes classic questions of strategic behavior and market structure. The journal also seeks to publish articles dealing with technological change, internal organization of firms, regulation, antitrust and productivity analysis. We recognize the need to allow for diversity of perspectives and research styles in industrial organization and we encourage submissions in theoretical work, empirical work, and case studies. The journal will also occasionally publish symposia on topical issues.
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