Obstacles to redistribution through markets and one solution

Roy Allen and John Rehbeck ()
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John Rehbeck: The Ohio State University

Economic Theory Bulletin, 2023, vol. 11, issue 2, No 8, 235-242

Abstract: Abstract Dworczak et al. (Econometrica 89:1665–1698, 2021) study when certain market structures are optimal for agents with linear preferences and bivariate preference heterogeneity. The optimal market structure requires the social planner to know the joint distribution of the value of the good and marginal value of money. We show that the features of the distribution needed to characterize optimal market structure cannot be identified from standard demand data where probability of purchase depends only on observed price. While this is a negative result, we show that the distribution for the value of the good and marginal utility of money can be fully identified when there is an observed measure of quality that can serve as a benchmark to make utility comparisons.

Keywords: Demand; Identification; Revealed preference (search for similar items in EconPapers)
JEL-codes: C00 D01 D11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s40505-023-00255-5

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