Nuffield Economic Theory Seminar
Friday, 22 May 2026, 11am to 12.15pm
Many economic transactions are banned or regulated due to paternalistic considerations. We incorporate paternalistic motives into a mechanism design framework. A planner seeks to organize trade between a continuum of buyers and sellers with private information about their valuation for a good. The planner's normative assessment of each transaction might differ from the agents' decision utility, as she believes that individuals do not act in their best interest. We axiomatize a class of social welfare functions that reflect paternalistic concerns, and shows how it captures several popular models of behavioral bias. A key determinant of the optimal mechanism is whether the social planner's paternalistic motives preserve the ordering between agents with heterogenous valuations for the good. When it does, a ``sin tax'' is optimal and achieves the first-best. Otherwise, the optimal mechanism may ration one side of the market or even prohibit transactions, even when gains from trade exist under complete information. We discuss applications to repugnant markets and the regulation of sin goods.
Speaker(s): Julien Combe (École Polytechnique / CREST)
Series: Nuffield Economic Theory Seminar
Venue:
Manor Road Building - Seminar Room G
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Seminar Room G Manor Road Building Manor Road Oxford Oxfordshire OX1 3UQ United Kingdom
Department: Economics (Department)