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Mechanism Design with Expenditure Consideration

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  • Kiho Yoon

    () (Department of Economics, Korea University, Seoul, South Korea)

Abstract

We characterize the structure of optimal assignment rules when both allocative ineffciency and expenditure ineffciency 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 ineffciency of the optimal assignment rule decreases as the variability of value distribution increases.

Suggested Citation

  • Kiho Yoon, 2009. "Mechanism Design with Expenditure Consideration," Discussion Paper Series 0903, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:0903
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0903.pdf
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
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    Citations

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    Cited by:

    1. Helmuts Āzacis & Péter Vida, 2015. "Collusive communication schemes in a first-price auction," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(1), pages 125-160, January.
    2. Holzer Jorge & McConnell Kenneth, 2016. "A Model of Access in the Absence of Markets," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 367-388, January.
    3. repec:aea:aecrev:v:107:y:2017:i:9:p:2666-94 is not listed on IDEAS
    4. Chakravarty, Surajeet & Kaplan, Todd R., 2013. "Optimal allocation without transfer payments," Games and Economic Behavior, Elsevier, vol. 77(1), pages 1-20.
    5. Kwiek, Maksymilian, 2017. "Efficient voting with penalties," Games and Economic Behavior, Elsevier, vol. 104(C), pages 468-485.
    6. repec:eee:jetheo:v:171:y:2017:i:c:p:101-135 is not listed on IDEAS
    7. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, Exeter University, Department of Economics.
    8. 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.
    9. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications, Elsevier.
    10. 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.
    11. Kwiek, Maksymilian & Marreiros, Helia & Vlassopoulos, Michael, 2016. "An experimental study of voting with costly delay," Economics Letters, Elsevier, vol. 140(C), pages 23-26.
    12. Condorelli, Daniele, 2012. "What money canʼt buy: Efficient mechanism design with costly signals," Games and Economic Behavior, Elsevier, vol. 75(2), pages 613-624.
    13. Tymofiy Mylovanov & Andriy Zapechelnyuk, 2017. "Optimal Allocation with Ex Post Verification and Limited Penalties," American Economic Review, American Economic Association, vol. 107(9), pages 2666-2694, September.

    More about this item

    Keywords

    auctions; contests; lottery; random assignment; ineffciency;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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