Implementing an Optimal Mechanism under Adverse Selection: An Environmental Policy Application
Year: 2006
Type: article
Abstract: Mechanism design models typically conclude by characterizing an optimal alloca-tion schedule based on the principal’s beliefs regarding agent value functions and the distribution of agent types. This article addresses the question of how a principal can develop these beliefs given a standard cross-sectional data set in which agents ’ input-output choices are observable, but their underlying heterogeneity is not. I employ the methodology to evaluate strategies for reducing the cost of a voluntary program that reduces cultivation on environmentally-sensitive farmland.
Author: Glenn Sheriff
Institution: Environmental Protection Agency
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2914991704