Optimal choice of characteristics for a nonexcludable good

Isabelle Brocas

RAND Journal of Economics, 2008, vol. 39, issue 1, pages 283-304

Abstract: In this model, a principal decides whether to produce one indivisible good and which characteristics it contains. Agents are differentiated along two substitutable dimensions: a vertical parameter that captures their valuation for the good, and a horizontal parameter that captures their disutility when the characteristics are distant from their preferred ones. When valuations are private information, the principal produces a good with characteristics more on the lines of the preferences of the agent with the lowest valuation. Under asymmetric information on the horizontal dimension, the principal biases the decision in favor of the agent who incurs the highest disutility. Copyright (c)2008, RAND.

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