Optimal Allocation With Ex-Post Verification And Limited Penalties
We study the problem of allocating a prize to one of several agents. The social value of giving the prize to an agent is privately known by this agent. The allocation rule chooses the winner of the prize based on the agents’ reports about these values. After the prize is allocated, the social value of giving the prize to the winner becomes commonly known and the agent can be penalized for lies about the value. We show that, if the number of agents is low, the optimal allocation rule takes the form of a restricted-bid procedure; otherwise, it takes the form of a shortlisting procedure. Examples of applications of this model are grant competitions, scholarship allocations, and hiring for a fixed-salary post.
|Date of creation:||Oct 2016|
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