Market versus Non-Market Assignment of Initial Ownership

Che, Yeon-Koo and Gale, Ian (2006): Market versus Non-Market Assignment of Initial Ownership.

Abstract

We study the initial assignment of ownership of a good. When the good is sold at the market-clearing price, wealthy agents may acquire it instead of poor agents who value it more highly, all else equal. Non-market assignment schemes such as random rationing may allocate the good more efficiently than the competitive market would --- if recipients of the good are allowed to resell. Schemes that favor the poor are even more desirable in that context. The ability to resell is critical to the results, but resale induces speculators to participate, so regulation of resale may be beneficial.

• Item Type: MPRA Paper
• Language: English
• Subjects: D - Microeconomics > D0 - General; D - Microeconomics > D2 - Production and Organizations; D - Microeconomics > D3 - Distribution; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty