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Optimal Allocation without Transfer Payments

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  • Chakravarty, Surajeet
  • Kaplan, Todd R.

Abstract

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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18481.

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Date of creation: 24 Oct 2006
Date of revision: 02 Mar 2009
Handle: RePEc:pra:mprapa:18481

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Keywords: mechanism design; efficient allocation; waiting lines; lotteries; all-pay auctions;

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References

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  1. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
  2. Yoon, Kiho, 2011. "Optimal mechanism design when both allocative inefficiency and expenditure inefficiency matter," Journal of Mathematical Economics, Elsevier, vol. 47(6), pages 670-676.
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  4. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521551847, April.
  5. Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2005. "The Theory of Assortative Matching Based on Costly Signals," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 85, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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  8. Condorelli, Daniele, 2012. "What money canʼt buy: Efficient mechanism design with costly signals," Games and Economic Behavior, Elsevier, vol. 75(2), pages 613-624.
  9. Winston Koh & Zhenlin Yang & Lijing Zhu, 2006. "Lottery Rather than Waiting-line Auction," Social Choice and Welfare, Springer, vol. 27(2), pages 289-310, October.
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  15. Jacques Crémer & Yossi Spiegel & Charles Zheng, 2009. "Auctions with costly information acquisition," Economic Theory, Springer, vol. 38(1), pages 41-72, January.
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    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Suen, Wing, 1989. "Rationing and Rent Dissipation in the Presence of Heterogeneous Individuals," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1384-94, December.
  18. Roth, Alvin & Ünver, M. Utku & Sönmez, Tayfun, 2004. "Kidney Exchange," Scholarly Articles 2580565, Harvard University Department of Economics.
  19. McAfee, R. Preston & Miller, ALan, 2010. "The Tradeoff of the Commons," MPRA Paper 26423, University Library of Munich, Germany.
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Citations

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Cited by:
  1. Kaplan, Todd R & Zamir, Shmuel, 2014. "Advances in Auctions," MPRA Paper 54656, University Library of Munich, Germany.
  2. Guo, Mingyu & Conitzer, Vincent, 2009. "Worst-case optimal redistribution of VCG payments in multi-unit auctions," Games and Economic Behavior, Elsevier, vol. 67(1), pages 69-98, September.
  3. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Voting Rules," Working Papers tecipa-493, University of Toronto, Department of Economics.
  4. Kiho Yoon, 2009. "Mechanism Design with Expenditure Consideration," Discussion Paper Series 0903, Institute of Economic Research, Korea University.
  5. Kos, Nenad & Messner, Matthias, 2013. "Incentive compatibility in non-quasilinear environments," Economics Letters, Elsevier, vol. 121(1), pages 12-14.
  6. Kleiner, Andreas & Drexl, Moritz, 2013. "Why Voting? A Welfare Analysis," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79886, Verein für Socialpolitik / German Economic Association.
  7. Condorelli, Daniele, 2012. "What money canʼt buy: Efficient mechanism design with costly signals," Games and Economic Behavior, Elsevier, vol. 75(2), pages 613-624.
  8. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.
  9. Daniele Condorelli, 2009. "What money can't buy: allocations with priority lists, lotteries and queues," Discussion Papers 1482, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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