Journal Article A Theorem on Utilitarianism Get access Eric Maskin Eric Maskin Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 45, Issue 1, February 1978, Pages 93–96, https://doi.org/10.2307/2297086 Published: 01 February 1978

We study a credit model where, because of adverse selection, unprofitable projects may nevertheless be financed. Indeed they may continue to be financed even when shown to be low-quality if sunk costs have already been incurred. We show that credit decentralization offers a way for creditors to commit not to refinance such projects, thereby discouraging entrepreneurs from undertaking them initially. Thus, decentralization provides financial discipline. Nevertheless, we argue that it puts too high a premium on short-term returns. The model seems pertinent to two issues: “soft budget constraint” problems in centralized economies, and differences between “Anglo-Saxon” and “German-Japanese” financing practices.

We exhibit an efficient auction (an auction that maximizes surplus conditional on all available information). For private values, the Vickrey auction (for one good) or its Groves-Clarke extension (for multiple goods) is efficient. We show that the Vickrey and Groves-Clarke auctions can be generalized to attain efficiency when there are common values, if each buyer's information can be represented as a one-dimensional signal. When a buyer's information is multidimensional, no auction is generally efficient. Nevertheless, in a broad class of cases, our auction is constrained-efficient in the sense of being efficient subject to incentive constraints.

Olivier J. Blanchard, Eric S. Maskin, Lawrence H. Summers; Manifesto, The Quarterly Journal of Economics, Volume 100, Issue 1, 1 February 1985, Pages iii,

We study a barter economy in which each good is produced in two qualities and no trader can distinguish between the qualities of those goods he neither consumes nor produces. We show that in competitive equilibrium there exists a (unique) good—the one for which the discrepancy between qualities is smallest—that serves as the medium of exchange: this good mediates every trade. Equilibrium is inefficient because production of the medium would be lower if it were not for its mediating role. Introducing fiat money enhances welfare by eliminating this distortion. However, high inflation drives traders back to the commodity medium.

Partha Dasgupta, Peter Hammond, Eric Maskin; On Imperfect Information and Optimal Pollution Control, The Review of Economic Studies, Volume 47, Issue 5, 1