Trading favors? UN Security Council membership and subnational favoritism in aid recipients

Berlin, Maria; Desai, Raj M.; Olofsgård, Anders

doi:10.1007/s11558-022-09467-z

Cited by 6 publications

(1 citation statement)

References 53 publications

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“…However, agents may inflate their requests especially when resources are scarce and the requests are placed during a crisis. Also, allocation distortion exists due to external factors, such as political favoritism, regional favoritism, and so on (see Dreher et al., 2013; Liu & Zhou, 2021; Berlin et al., 2022). In this paper, we use the term “favoritism” to capture all sorts of “transaction powers” endowed by an agent, which can be inherited through social, economic, political, or historical reasons.…”

Section: Introductionmentioning

confidence: 99%

Allocating scarce resources in the presence of private information and heterogeneous favoritism

Fan

Chen

Tang

2023

Production and Operations Management

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Motivated by the challenge of allocating scarce resources from the federal government to different states during the COVID-19 pandemic, this paper studies optimal schemes for allocating scarce resources to agents with private demand information under different favoritism structures. Through an investigation of a mechanism design model that aims to induce agents to report their demands truthfully, we find the following results. First, when the principal purely cares about social welfare and when the principal has sufficient resources to satisfy all agents' demands, we find that the optimal allocation scheme is efficient in the sense that it is identical to the optimal scheme for the "benchmark" case when favoritism differentials and information asymmetry are both absent. Second, when rationing is needed due to resource scarcity, we show that heterogeneity in "event-independent" favoritism across agents will cause the principal to allocate more resources to agents with larger favoritism and less resources to others, resulting in inefficient allocations. Third, when agents possess heterogeneous "event-specific" favoritism due to the existence of outside options, the resulting allocation may boost all agents' expected utilities, including those agents who do not have any outside option. Finally, we show that the "allocation distortion" caused by both information asymmetry and heterogeneous favoritism can be reduced when "positive externality" is present (i.e., allocating resources to one agent can benefit other agents).

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Section: Introductionmentioning

confidence: 99%