Book Review: “Oligopoly, Auctions and Market Quality” by Krishnendu Ghosh Dastidar
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The two central pillars of modern economic theory are the theory of games and the economics of information. The recognition that information is dispersed among interacting agents who behave strategically, is not only more realistic but also yields richer insights when compared to classical models. Professor Krishnendu Ghosh Dastidar, one of India’s leading economic theorists, uses this framework to analyse a range of important issues in industrial policy. The heart of book consists of three essays built around the theme of designing policy in the presence of strategic oligopolistic firms and a host of distortions that he refers to as “poor market quality”.
The first of these essays (Chapter 2) revisits a fundamental problem in economics: what is the best way to allocate scarce resources in the possession of the Government (such as coal or spectrum)? One standard response to this question is to do this “efficiently” (more specifically, to ensure Pareto efficiency). For instance, if...