Chakravarty, Surajeet and Kaplan, Todd R. (2006): Optimal Allocation without Transfer Payments.
Download (290Kb) | Preview
Often an organization or government must allocate goods without collecting payment in return. This may pose a difficult problem either when agents receiving those goods have private information in regards to their values or needs or when discriminating among agents using known differences is not a viable option. In this paper, we find an optimal mechanism to allocate goods when the designer is benevolent. While the designer cannot charge agents, he can receive a costly but wasteful signal from them. We find conditions for which ignoring these costly signals by giving agents equal share (or using lotteries if the goods are indivisible) is optimal. In other cases, those that send the highest signal should receive the goods; however, we then show that there exist cases where more complicated mechanisms are superior. Finally, we show that the optimal mechanism is independent of the scarcity of the goods being allocated.
|Item Type:||MPRA Paper|
|Original Title:||Optimal Allocation without Transfer Payments|
|Keywords:||mechanism design; efficient allocation; waiting lines; lotteries; all-pay auctions|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
|Depositing User:||Todd R Kaplan|
|Date Deposited:||09. Nov 2009 01:47|
|Last Modified:||20. Feb 2013 00:19|
BBC News "Waiting Over for Would-be Buyers," May 31, 2007. http://news.bbc.co.uk/1/hi/england/devon/6706825.stm
BBC News "Debate Over School Lottery System," June 12, 2007. http://news.bbc.co.uk/1/hi/england/sussex/6745069.stm
Blecher, J., "Marathon: Paying Top Dollar For Punishment, 26 Miles' Worth," New York Times, September 16, 2006.
Brams, S. J. and Kilgour, M.D., "Competitive Fair Division," Journal of Political Economy, 2001, 109 (2), 418-43.
Brams, S. J. and Taylor, Alan D., "Fair Division: From Cake- Cutting to Dispute Resolution," Cambridge University Press, 1996.
Che, Y.-K. and Gale, I., "Allocating Resources to Wealth Constrained Agents," Dept. of Economics, Columbia University, 2006.
Crémer, J., Spiegel, J. and Zheng, C. Z., "Auctions with Costly Information Acquisition," Economic Theory, 2009, 38 (1), 41-72.
Fullerton, R. and McAfee, P., "Auctioning Entry into Tournaments," Journal of Political Economy, 1999, 107 (3), 573-605.
Gardner, E., "Metropolitan Doors Open Even Wider," USA Today, October 5, 2006. http://www.usatoday.com/travel/destinations/2006-10-05-metropolitan-opera_x.htm
Gavious, A., Moldovanu, B. and Sela, A., "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, 2002, 33 (4), 709-22.
Goeree, J. K., Maasland, E., Onderstal, S. and Turner, J. L.,"How Not to (Raise) Money," Journal of Political Economy, August 2005, 113 (4), 897-918.
Hartline, J.D. and Roughgarden, T., "Optimal Mechansim Design and Money Burning," http://www.citebase.org/abstract?id=oai:arXiv.org:0804.2097, 2008.
Hoppe, H., Moldovanu, B. and Sela, A., "The Theory of Assortative Matching Based on Costly Signals," Review of Economics Studies, forthcoming.
Koh, W.T.H., Yang, Z. and Zhu, L.,"Lottery Rather than Waiting-line Auction," Social Choice and Welfare, 2006, 27 (2), 289-310.
Ledyard, J. and Palfrey, T., "A General Characterization of Interim Efficient Mechanisms for Independent Linear Environments, "Journal of Economic Theory, March 2007, 133(1), 441-466.
McAfee, R.P. and McMillan J., "Bidding Rings," American Economic Review, June 1992, 82(3), 579-599.
Milgrom, P. "Putting Auction Theory to Work," Cambridge University Press, 2004.
Moldovanu, B. and Sela, A., "The Optimal Allocation of Prizes in Contests," American Economic Review, June 2001, 91 (3), 542-58.
Myerson, R.B., "Optimal Auction Design," Mathematics of Operations Research, June 1981, 6 (1), 58-73.
Roth, A., Sönmez, T. and Ünver, M. U., "Kidney Exchange," Quarterly Journal of Economics, May 2004, 119 (2), 457-88.
Roth, A., "Repugnance as a Constraint on Markets," The Journal of Economic Perspectives, Summer 2007, 21 (3), 37-58.
Sönmez, T. and Ünver, M. U., "Course Bidding at Business Schools," Boston College Working Papers in Economics 618, Boston College, Department of Economics. 2005.
Taylor, G.A., Tsui, K.K.K. and Zhu, L., "Lottery or waiting-line auction?" Journal of Public Economics, 2003, 87 (5), 1313--34.