Efficient assignment mechanisms for liquidity-constrained agents
AbstractWe study alternative methods of assigning scarce resources to individuals who may be liquidity-constrained. Selling the resources via auctions is increasingly popular, but that method may produce an inefficient allocation when agents are liquidity constrained. A simple non-market scheme such as random assignment does better, if resale is allowed, since individuals with a high valuation but low liquidity are more likely to be assigned initially, and recipients with low valuations will resell to those with high valuations. Similarly, a need-based assignment scheme favoring those with low liquidity enhances welfare. Lotteries with entry fees could also be desirable. The optimal mechanism displays features of the non-market schemes such as in-kind and cash subsidies.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 31 (2013)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/inca/505551
Liquidity-constrained agents; Lottery; Random rationing; Resale; Cash subsidy; Optimal mechanism;
Find related papers by JEL classification:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
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