Optimal mechanism design when both allocative inefficiency and expenditure inefficiency matter

Yoon, Kiho

doi:10.1016/j.jmateco.2011.09.002

Cited by 17 publications

(14 citation statements)

References 23 publications

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“…However, in the model below, an agent cannot learn anything about her values from other agents. McAfee and McMillan (1992), followed by a series of more recent papers by Hartline and Roughgarden (2008), Yoon (2011), Condorelli (2012 and Chakravarty and Kaplan (2013) are closer to the analysis below. They share one feature, namely that the participants' bids, or efforts, are a social waste.…”

Section: Literature Further Results and Assumptionsmentioning

confidence: 77%

Efficient voting with penalties

Kwiek

2017

Games and Economic Behavior

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Simple majority does not reflect the intensity of voters' preferences. This paper presents an efficient collective choice mechanism when the choice is binary and the designer may use non-trasferable punishments to persuade agents to reveal their private information. The designer faces a dilemma -a punishment may induce a more correct choice, but its cost is socially wasteful. The efficient mechanism is a weighted majority. Weight of each individual is known ex ante and no punishments applied if preferences are relatively homogenous. Eliciting types through punishments in order to construct type-specific weights should occur if preference intensity is relatively heterogeneous, or if voters preferences represent a larger population.

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Section: Literature Further Results and Assumptionsmentioning

confidence: 77%

Efficient voting with penalties

Kwiek

2017

Games and Economic Behavior

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“…From a setting of symmetric independent individual private valuations and survival function representations of individual and aggregate demand, the optimal 6 The Gini coefficient of the beta distribution is given by (α/2)B(α + β, α + β)/(B(α, α)B(β, β)).…”

Section: Discussionmentioning

confidence: 99%

“…And [8] investigated the allocation problem when individual signaling costs are socially wasteful and the agency seeks to maximize expected social surplus. Consistent with [6] and [7], lottery assignment is shown to be optimal under certain conditions on individual types and the value distribution's hazard rate.…”

Section: Introductionmentioning

confidence: 97%

“…In the mechanism design literature, [6] considered the case of two individuals with independent private valuations competing for a single unit of a good and demonstrated that expected net efficiency is maximized by random assignment if individuals incur sufficient signaling costs and the hazard rate of the distribution of individual private valuations is increasing. [7] also found random assignment to be optimal given an arbitrary number of ex ante identical individuals and a value distribution with an increasing hazard rate, whereas market assignment is optimal if sufficient screening costs are incurred by the agency and the hazard rate is decreasing.…”

Section: Introductionmentioning

confidence: 99%

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Optimal (Under-)Pricing and Allocation of Publicly Provided Goods

Scrogin¹

2017

TEL

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This paper exploits the links between a private value distribution's hazard rate, mean residual value, and eta functions in order to characterize postedprice rules for a public agency to allocate scarce units of an indivisible good under the utilitarian distributional objective of maximizing expected consumer surplus. Sufficient conditions on the monotonic and non-monotonic classes of the functions are established that identify either market assignment at the clearing price or lottery assignment with partial or complete underpricing as the optimal allocation mechanism. The results are summarized across a wide range of parametric value distributions, and selected non-monotonic cases are evaluated numerically to determine the relative scarcity or abundance of the good necessary for market or non-market assignment to dominate.

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“…5 There is also a less directly related literature suggesting that signaling, even if costly for individual agents, may improve economic e¢ ciency in allocation problems. For example, Chakravarty and Kaplan (2013) show that allocation of goods without transfers may be more e¢ cient if agents are able to send costly signals to the mechanism designer (see also Condorelli (2012) and Yoon (2011)). …”

Section: Introductionmentioning

confidence: 99%

Delegation and nonmonetary incentives

Ambrus

Egorov

2017

Journal of Economic Theory

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In many contracting settings, actions costly to one party but with no direct bene…ts to the other (money-burning) may be part of the explicit or implicit contract. A leading example is bureaucratic procedures in an employer-employee relationship. We study a model of delegation with an informed agent, where the principal may impose money-burning on the agent as a function of the agent's choice of action, and show that money-burning may be part of the optimal contract. This result holds even if action-contingent monetary transfers are possible, as long as transfers from the principal to the agent are bounded from below (as in limited liability or minimal wage requirements). In fact, the optimal contract can involve a combination of both e¢ cient monetary incentives and ine¢ cient nonmonetary incentives through money burning. Our model delivers some results novel to the delegation literature. First, money-burning is more likely if the principal is more "sensitive" to the choice of action than the agent. This is consistent with the perception that there is more bureaucratization in large organizations. Second, money-burning is more likely if the agent's limited liability constraint is tighter relative to his participation constraint. This implies that a higher minimum wage distorts employment contracts towards using socially wasteful nonmonetary incentives, leading to a Pareto inferior outcome as the agent is still held down to his reservation value through increased money burning.

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Optimal mechanism design when both allocative inefficiency and expenditure inefficiency matter

Cited by 17 publications

References 23 publications

Efficient voting with penalties

Efficient voting with penalties

Optimal (Under-)Pricing and Allocation of Publicly Provided Goods

Delegation and nonmonetary incentives

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