Constrained efficiency is characterized in an asset market, subject to search frictions, where sellers are privately informed about the type of their asset. The determines opportunity cost for and quality buyers. constrained-efficient allocation implemented using a sales tax schedule. optimal schedule has single-crossing property, requiring trading low-quality assets be subsidized high-quality ...

This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. then use this result characterize, active market, unique budget-balanced allocation implemented by tariff making additional trades with entrant Motivated the recursive structure of allocation, we finally show that i...