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An Experimental Examination into the Design of Decentralized Methods to Solve the Assignment Problem with and without Money

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  • Olson, Mark
  • Porter, David

Abstract

An experimental examination of the assignment problem, matching individuals to positions or slots, is conducted in which various assignment mechanisms are analyzed. Generalized versions of both the Vicrey and English auctions are designed to solve the assignment problem along with ordinal ranking mechanisms (serial dictator and "funny" money system). The generalized auctions result in efficient allocations. In contrast, the ordinal ranking mechanisms, which require no monetary transfers, are significantly less efficient in their assignments. However, the efficient allocations obtained from the competitive bidding processes are at the expense of consumers' surplus since demanders retain significantly larger profits with the ordinal ranking mechanisms.

Suggested Citation

  • Olson, Mark & Porter, David, 1994. "An Experimental Examination into the Design of Decentralized Methods to Solve the Assignment Problem with and without Money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(1), pages 11-40, January.
  • Handle: RePEc:spr:joecth:v:4:y:1994:i:1:p:11-40
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    Cited by:

    1. Joana Pais & Ágnes Pintér & Róbert F. Veszteg, 2011. "College Admissions And The Role Of Information: An Experimental Study," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 713-737, August.
    2. Andersson, Tommy & Andersson, Christer & Andersson, Ola, 2010. "Sealed Bid Auctions vs. Ascending Bid Auctions: An Experimental Study," Working Papers 2010:17, Lund University, Department of Economics.
    3. John Ledyard & Charles Noussair & David Porter, 1996. "The allocation of a shared resource within an organization," Review of Economic Design, Springer;Society for Economic Design, vol. 2(1), pages 163-192, December.
    4. Arnaud Dellis & Sean D’Evelyn & Katerina Sherstyuk, 2011. "Multiple votes, ballot truncation and the two-party system: an experiment," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(2), pages 171-200, July.
    5. Chen, Yan & Sonmez, Tayfun, 2006. "School choice: an experimental study," Journal of Economic Theory, Elsevier, vol. 127(1), pages 202-231, March.
    6. Gallien, Jérémie. & Wein, Lawrence M., 2003. "Design and analysis of a smart market for industrial procurement," Working papers WP 4137-00., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Juan D Carrillo & Saurabh Singhal, 2011. "Tiered Housing Allocation: an Experimental Analysis," Working Paper 8511, USC Lusk Center for Real Estate.
    8. Bolle, Friedel & Breitmoser, Yves & Otto, Philipp E., 2011. "A positive theory of cooperative games: The logit core and its variants," MPRA Paper 32918, University Library of Munich, Germany.
    9. Christer Andersson & Ola Andersson & Tommy Andersson, 2013. "Sealed bid auctions versus ascending bid auctions: an experimental study," Review of Economic Design, Springer;Society for Economic Design, vol. 17(1), pages 1-16, March.
    10. André Schmelzer, 2017. "Strategy-proofness of stochastic assignment mechanisms," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_13, Max Planck Institute for Research on Collective Goods.
    11. Pais, Joana & Pintér, Ágnes, 2008. "School choice and information: An experimental study on matching mechanisms," Games and Economic Behavior, Elsevier, vol. 64(1), pages 303-328, September.
    12. Yan Chen & Tayfun Sönmez, 2002. "Improving Efficiency of On-Campus Housing: An Experimental Study," American Economic Review, American Economic Association, vol. 92(5), pages 1669-1686, December.
    13. Zhu, Min, 2014. "College admissions in China: A mechanism design perspective," China Economic Review, Elsevier, vol. 30(C), pages 618-631.
    14. Goeree, Jacob K. & Offerman, Theo & Schram, Arthur, 2006. "Using first-price auctions to sell heterogeneous licenses," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 555-581, May.

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