Optimal Pricing of Public Lotteries and Comparison of Competing Mechanisms

David Scrogin () and Chen Ling
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David Scrogin: University of Central Florida, Orlando, FL

No 2012-05, Working Papers from University of Central Florida, Department of Economics

Abstract: The negative effects of price controls on consumer surplus in competitive markets are well known. But what of consumer surplus if supply is fixed, as with rival but otherwise non-excludable goods held in public trust? This paper establishes optimal pricing rules for rationing indivisible units of such goods by lottery or mixture of a lottery and auction. The solution to the pricing problem appears in classic inverse elasticity form that may be directly implemented. Analysis of a rich class of private value distributions indicates the optimal lottery yields sizable gains in expected consumer surplus over competitive pricing and zero pricing.

Keywords: lotteries; price control; surplus (search for similar items in EconPapers)
JEL-codes: D61 H27 (search for similar items in EconPapers)
Pages: 28 Pages
Date: 2012-09
New Economics Papers: this item is included in nep-mkt
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Related works:
Journal Article: Optimal pricing of public lotteries and comparison of competing mechanisms (2014)
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