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Dynamic Allocation without Money

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  • Guo, Yingni
  • Hörner, Johannes

Abstract

We analyze the optimal design of dynamic mechanisms in the absence of transfers. The agent’s value evolves according to a two-state Markov chain. The designer uses future allocation decisions to elicit private information. We solve for the optimal allocation mechanism. Unlike with transfers, efficiency decreases over time. In the long run, polarization occurs. A simple implementation is provided. The agent is endowed with a “quantified entitlement,” corresponding to the number of units he is entitled to claim in a row.

Suggested Citation

  • Guo, Yingni & Hörner, Johannes, 2020. "Dynamic Allocation without Money," TSE Working Papers 20-1133, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:124604
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    References listed on IDEAS

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    Cited by:

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    3. Gregorio Curello & Ludvig Sinander, 2020. "Screening for breakthroughs," Papers 2011.10090, arXiv.org, revised Feb 2024.

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    More about this item

    Keywords

    mechanism design; principal-agent; quota mechanism; token budget;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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