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Redistributive allocation mechanisms

Author

Listed:
  • Mohammad Akbarpour

    (Stanford University)

  • Piotr Dworczak

    (Northwestern University
    Group for Research in Applied Economics (GRAPE))

  • Scott Duke Kominers

    (Harvard University)

Abstract

Many scarce public resources are allocated below market-clearing prices (and sometimes for free). Such ``non-market'' mechanisms necessarily sacrifice some surplus, yet they can potentially improve equity by increasing the rents enjoyed by agents with low willingness to pay. In this paper, we develop a model of mechanism design with redistributive concerns. Agents are characterized by a privately observed willingness to pay for quality, and a publicly observed label. A market designer controls allocation and pricing of a set of objects of heterogeneous quality, and maximizes a linear combination of revenue and total surplus---with Pareto weights that depend both on observed and unobserved agent characteristics. We derive structural insights about the form of the optimal mechanism and describe how social preferences influence the use of non-market mechanisms.

Suggested Citation

  • Mohammad Akbarpour & Piotr Dworczak & Scott Duke Kominers, 2020. "Redistributive allocation mechanisms," GRAPE Working Papers 40, GRAPE Group for Research in Applied Economics.
    • Handle: RePEc:fme:wpaper:40
    as

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    File URL: http://grape.org.pl/WP/40_Dworczak_website.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ostrizek, Franz & Sartori, Elia, 2023. "Screening while controlling an externality," Games and Economic Behavior, Elsevier, vol. 139(C), pages 26-55.

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    More about this item

    Keywords

    optimal mechanism design; redistribution; inequality; welfare theorems;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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