Optimal mechanism design when both allocative inefficiency and expenditure inefficiency matter
We characterize the structure of optimal assignment rules when both allocative inefficiency and expenditure inefficiency (e.g., rent-seeking) are present. We find that the optimal structure critically depends on how the hazard rate of the value distribution behaves, and that it is often optimal to use probabilistic assignment rules so that the winner of the object is not always the one with the highest valuation. We also find that the inefficiency of the optimal assignment rule decreases as the variability of the value distribution increases.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chakravarty, Surajeet & Kaplan, Todd R., 2013.
"Optimal allocation without transfer payments,"
Games and Economic Behavior,
Elsevier, vol. 77(1), pages 1-20.
- Surajeet Chakravarty & Todd R. Kaplan, 2010. "Optimal Allocation without Transfer Payments," Discussion Papers 1004, Exeter University, Department of Economics.
- Chakravarty, Surajeet & Kaplan, Todd R., 2006. "Optimal Allocation without Transfer Payments," MPRA Paper 18481, University Library of Munich, Germany, revised 02 Mar 2009.
- 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.
- Green, Jerry & Stokey, Nancy, 1983.
"A Comparison of Tournaments and Contracts,"
3203644, Harvard University Department of Economics.
- Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2006.
"The Theory of Assortative Matching Based on Costly Signals,"
CEPR Discussion Papers
5543, C.E.P.R. Discussion Papers.
- Heidrun C. Hoppe & Benny Moldovanu & Aner Sela, 2009. "The Theory of Assortative Matching Based on Costly Signals," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 253-281.
- 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.
- Mark Bagnoli & Ted Bergstrom, 2005.
"Log-concave probability and its applications,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(2), pages 445-469, 08.
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Taylor, Grant A. & Tsui, Kevin K. K. & Zhu, Lijing, 2003. "Lottery or waiting-line auction?," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1313-1334, May.
- Bogomolnaia, Anna & Moulin, Herve, 2001. "A New Solution to the Random Assignment Problem," Journal of Economic Theory, Elsevier, vol. 100(2), pages 295-328, October.
- Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
- Hylland, Aanund & Zeckhauser, Richard, 1979. "The Efficient Allocation of Individuals to Positions," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 293-314, April.
- Erwin Amann & Wolfgang Leininger, 1995. "Expected revenue of all-pay and first-price sealed-bid auctions with affiliated signals," Journal of Economics, Springer, vol. 61(3), pages 273-279, October.
- 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.
- Benny Moldovanu & Aner Sela & Xianwen Shi, 2006.
"Contests For Status,"
0604, Ben-Gurion University of the Negev, Department of Economics.
- Moldovanu, Benny & Sela, Aner & Shi, Xianwen, 2005. "Contests for Status," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 139, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Winston Koh & Zhenlin Yang & Lijing Zhu, 2006. "Lottery Rather than Waiting-line Auction," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 27(2), pages 289-310, October.
When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:47:y:2011:i:6:p:670-676. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.