No abstract

A principal distributes an indivisible good to budget‐constrained agents when both valuation and budget are agents' private information. The principal can verify an agent's budget at a cost. The welfare‐maximizing mechanism can be implemented via a two‐stage scheme. First, agents report their budgets, receive cash transfers, and decide whether to enter a lottery over the good. Second, recipients of the good can sell it on a resale market but must pay a sales tax. Low‐budget agents receive a higher cash transfer, pay a lower price to enter the lottery, and face a higher sales tax. They are also randomly inspected.

This paper studies the design of ex ante efficient mechanisms in situations where a single object is for sale, and agents have positively interdependent values and can covertly acquire information at some cost before participating in a mechanism. We find that when the strength of interdependence is low or the number of agents is large, the ex post efficient mechanism is also ex ante efficient. In cases of high interdependence or a small number of agents, ex ante efficient mechanisms discourage agents from acquiring excessive information by introducing randomization to the ex post efficient allocation rule in areas where the information's accuracy increases most rapidly if an addition piece of information is acquired. In special cases, there exists an ex ante efficient mechanism that has a simple and appealing implementation: standard auctions with discrete bids.

No abstract

We offer a new way of thinking about labor market fluctuations. In a perfectly stationary physical environment of the labor market, moral hazard and competition in long‐term contracting generate cycles in market tightness, which may induce job creation and destruction, and two‐period and longer cycles in wages and employment. Long‐term contracts use termination as an incentive device. Underlying the cycles is an intertemporal negative externality. In prescribing a larger (smaller) probability of termination, each current period long‐term contract puts pressure on all next period long‐term contracts to prescribe a smaller (larger) probability of termination, by affecting the tightness of the market for long‐term contracts in the next period.