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A Characterization of Strongly Locally Incentive Compatible Planning Procedures With Public Goods

Jean-Jacques Laffont; Eric Maskin
Review of Economic Studies 1983 50(1), 171
This paper provides a systematic study of planning procedures with public goods in which local truthful revelation of preferences is a dominant strategy. These procedures are said to be strongly locally individually incentive compatible (SLIIC). We first characterize the (time invariant) continuously differentiable planning procedures that are SLIIC. Then, we study properties such as balancedness, cheatproofness with respect to coalitions, neutrality, individual rationality and we point out the connection with the MDP procedures.

Monopolistic Quantity Rationing

Volker Böhm; Eric Maskin; Heraklis Polemarchakis; Andrew Postlewaite
Quarterly Journal of Economics 1983 98, 189
In this paper we address the question of whether a price-setting monopolist can improve his welfare by imposing quantity constraints on buyers. We show first that if all buyers are identical, quantity rations are not useful for the monopolist. We then show by means of an example that if buyers are diverse, quantity rations may be desirable. It is shown that if there are only two commodities, the only constraint that may be useful to the monopolist is a zero constraint on one of the two commodities. An example shows that this property does not hold for more than two commodities.

Unemployment with Observable Aggregate Shocks

Sanford J. Grossman; Oliver D. Hart; Eric S. Maskin
Journal of Political Economy 1983 91(6), 907-928
A general equilibrium model of optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information.

Unemployment with Observable Aggregate Shocks

Sanford J. Grossman; Oliver Hart; Eric S. Maskin
Journal of Political Economy 1983 91(6), 907-928 open access
A general equilibrium model of optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information.