Econometrica: Jan 1981, Volume 49, Issue 1

Resource Allocation Under Asymmetric Information<33:RAUAI>2.0.CO;2-A
p. 33-64

Milton Harris, Robert M. Townsend

The purpose of this paper is to provide a method for characterizing efficient allocation processes and efficient allocations for a large class of environments in which asymmetric information is an important factor. This method is based on a rigorous application of statistical decision theory and makes explicit both the information available to agents ex ante and the way in which information is transmitted during any multistage allocation process.

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