IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/124604.html
   My bibliography  Save this paper

Dynamic Allocation without Money

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2020/wp_tse_1133.pdf
    File Function: Full Text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Doepke, Matthias & Townsend, Robert M., 2006. "Dynamic mechanism design with hidden income and hidden actions," Journal of Economic Theory, Elsevier, vol. 126(1), pages 235-285, January.
    2. Miralles, Antonio, 2012. "Cardinal Bayesian allocation mechanisms without transfers," Journal of Economic Theory, Elsevier, vol. 147(1), pages 179-206.
    3. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    4. Gian Luca Clementi & Hugo A. Hopenhayn, 2006. "A Theory of Financing Constraints and Firm Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 229-265.
    5. Marina Halac & Pierre Yared, 2014. "Fiscal Rules and Discretion Under Persistent Shocks," Econometrica, Econometric Society, vol. 82(5), pages 1557-1614, September.
    6. Hao Zhang & Stefanos Zenios, 2008. "A Dynamic Principal-Agent Model with Hidden Information: Sequential Optimality Through Truthful State Revelation," Operations Research, INFORMS, vol. 56(3), pages 681-696, June.
    7. Christine Hauser & Hugo Hopenhayn, 2008. "Trading Favors: Optimal Exchange and Forgiveness," Carlo Alberto Notebooks 88, Collegio Carlo Alberto.
    8. Fernandes, Ana & Phelan, Christopher, 2000. "A Recursive Formulation for Repeated Agency with History Dependence," Journal of Economic Theory, Elsevier, vol. 91(2), pages 223-247, April.
    9. Alderman, Harold, 2002. "Do local officials know something we don't? Decentralization of targeted transfers in Albania," Journal of Public Economics, Elsevier, vol. 83(3), pages 375-404, March.
    10. Garrett, Daniel F. & Pavan, Alessandro, 2015. "Dynamic managerial compensation: A variational approach," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 775-818.
    11. Alessandro Pavan & Ilya Segal & Juuso Toikka, 2014. "Dynamic Mechanism Design: A Myersonian Approach," Econometrica, Econometric Society, vol. 82(2), pages 601-653, March.
    12. Yingni Guo, 2016. "Dynamic Delegation of Experimentation," American Economic Review, American Economic Association, vol. 106(8), pages 1969-2008, August.
    13. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-1148, September.
    14. Lipnowski, Elliot & Ramos, João, 2020. "Repeated delegation," Journal of Economic Theory, Elsevier, vol. 188(C).
    15. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
    16. Andrey Malenko, 2019. "Optimal Dynamic Capital Budgeting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1747-1778.
    17. Jin Li & Niko Matouschek & Michael Powell, 2017. "Power Dynamics in Organizations," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 217-241, February.
    18. Stephen E. Spear & Sanjay Srivastava, 1987. "On Repeated Moral Hazard with Discounting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(4), pages 599-617.
    19. R. Vijay Krishna & Giuseppe Lopomo & Curtis R. Taylor, 2013. "Stairway to heaven or highway to hell: Liquidity, sweat equity, and the uncertain path to ownership," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 104-127, March.
    20. Bardhan, Pranab & Mookherjee, Dilip, 2005. "Decentralizing antipoverty program delivery in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 675-704, April.
    21. Rubinstein, Ariel & Yaari, Menahem E., 1983. "Repeated insurance contracts and moral hazard," Journal of Economic Theory, Elsevier, vol. 30(1), pages 74-97, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Yi, 2022. "Dynamic delegation with a persistent state," Theoretical Economics, Econometric Society, vol. 17(4), November.
    2. Ezzat Elokda & Saverio Bolognani & Andrea Censi & Florian Dorfler & Emilio Frazzoli, 2022. "A self-contained karma economy for the dynamic allocation of common resources," Papers 2207.00495, arXiv.org, revised May 2023.
    3. Gregorio Curello & Ludvig Sinander, 2020. "Screening for breakthroughs," Papers 2011.10090, arXiv.org, revised Feb 2024.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yingni Guo & Johannes Hörner, 2021. "Dynamic Allocation without Money," Working Papers hal-03187506, HAL.
    2. Yingni Guo & Johannes Horner, 2015. "Dynamic Mechanisms without Money," Cowles Foundation Discussion Papers 1985, Cowles Foundation for Research in Economics, Yale University.
    3. Krasikov, Ilia & Lamba, Rohit, 2021. "A theory of dynamic contracting with financial constraints," Journal of Economic Theory, Elsevier, vol. 193(C).
    4. Lipnowski, Elliot & Ramos, João, 2020. "Repeated delegation," Journal of Economic Theory, Elsevier, vol. 188(C).
    5. Rohit Lamba & Ilia Krasikov, 2017. "A Theory of Dynamic Contracting with Financial Constraints," 2017 Meeting Papers 1544, Society for Economic Dynamics.
    6. Hao Zhang, 2012. "Solving an Infinite Horizon Adverse Selection Model Through Finite Policy Graphs," Operations Research, INFORMS, vol. 60(4), pages 850-864, August.
    7. R. Vijay Krishna & Shiming Fu, 2016. "Dynamic Financial Contracting with Persistent Private Information," 2016 Meeting Papers 89, Society for Economic Dynamics.
    8. Dirk Bergemann & Juuso Välimäki, 2019. "Dynamic Mechanism Design: An Introduction," Journal of Economic Literature, American Economic Association, vol. 57(2), pages 235-274, June.
    9. Golosov, M. & Tsyvinski, A. & Werquin, N., 2016. "Recursive Contracts and Endogenously Incomplete Markets," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 725-841, Elsevier.
    10. Krähmer, Daniel & Strausz, Roland, 2022. "Dynamic Screening with Verifiable Bankruptcy," Rationality and Competition Discussion Paper Series 348, CRC TRR 190 Rationality and Competition.
    11. Rantakari, Heikki, 2023. "How to reward honesty?," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 129-145.
    12. Alex Bloedel & R. Vijay Krishna & Oksana Leukhina, 2018. "Insurance and Inequality with Persistent Private Information," Working Papers 2018-020, Federal Reserve Bank of St. Louis, revised 11 Aug 2024.
    13. Bergemann, Dirk & V�lim�ki, Juuso, 2017. "Dynamic Mechanism Design: An Introduction," CEPR Discussion Papers 12240, C.E.P.R. Discussion Papers.
    14. Alexander Karaivanov & Robert M. Townsend, 2014. "Dynamic Financial Constraints: Distinguishing Mechanism Design From Exogenously Incomplete Regimes," Econometrica, Econometric Society, vol. 82(3), pages 887-959, May.
    15. Hao Zhang, 2012. "Analysis of a Dynamic Adverse Selection Model with Asymptotic Efficiency," Mathematics of Operations Research, INFORMS, vol. 37(3), pages 450-474, August.
    16. Chen, Yi, 2022. "Dynamic delegation with a persistent state," Theoretical Economics, Econometric Society, vol. 17(4), November.
    17. Yared, Pierre, 2010. "A dynamic theory of war and peace," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1921-1950, September.
    18. Bergemann, Dirk & Pavan, Alessandro, 2015. "Introduction to Symposium on Dynamic Contracts and Mechanism Design," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 679-701.
    19. Long Gao, 2023. "Optimal Incentives for Salespeople with Learning Potential," Management Science, INFORMS, vol. 69(6), pages 3285-3296, June.
    20. Williams, Noah, 2015. "A solvable continuous time dynamic principal–agent model," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 989-1015.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:124604. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.