The informational role of prices-super- 1

Eirik Romstad

European Review of Agricultural Economics, 2008, vol. 35, issue 3, 263-280

Abstract: The paper extends the framework of prices beyond the standard market setting to incorporate public goods and natural resources. These are settings where one does not usually think of market solutions. Core theory has established that price-taking behaviour by both suppliers and consumers, i.e. the absence of strategic considerations, greatly improves the informational value of prices, and hence of economic equilibria. This also holds when using market-like institutions to allocate resources for public goods. Policy effectiveness in many areas can be improved when agents are induced to reveal, voluntarily and truthfully, their willingness-to-pay or production costs. Oxford University Press and Foundation for the European Review of Agricultural Economics 2008; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2008
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