Many scarce public resources are allocated below market-clearing prices (and sometimes for free). Such "non-market" mechanisms necessarily sacrifice some surplus, yet they can potentially improve equity by increasing the rents enjoyed by agents with low willingness to pay. In this paper, we develop a model of mechanism design with redistributive concerns. Agents are characterized by a privately observed willingness to pay for quality, and a publicly observed label. A market designer controls allocation and pricing of a set of objects of heterogeneous quality, and maximizes a linear combination of revenue and total surplus| with Pareto weights that depend both on observed and unobserved agent characteristics. We derive structural insights about the form of the optimal mechanism and describe how social preferences influence the use of non-market mechanisms.
Piotr is an assistant professor in the Economic Department at Northwestern University. His research interests include mechanism and information design, with emphasis on information in financial over-the-counter markets. Piotr's most recent work studies market-design responses to inequality. He's also a coffee addict and enjoys hanging out with his beautiful wife and daughter.
Opublikowane | Published
Redistributive allocation mechanisms | Econometrica Przeczytaj streszczenie | Read abstract
W toku | Work in progress
Are simple mechanisms optimal when agents are unsophisticated? Przeczytaj streszczenie | Read abstract
We study the design of mechanisms involving agents that have limited strategic sophistication. The literature has identified several notions of simple mechanisms in which agents can determine their optimal strategy even if they lack cognitive skills such as predicting other agents' strategies (strategy-proof mechanisms), contingent reasoning (obviously strategy-proof mechanisms), or foresight (strongly obviously strategy-proof mechanisms). We examine whether it is optimal for the mechanism designer who faces strategically unsophisticated agents to offer a mechanism from the corresponding class of simple mechanisms. We show that when the designer uses a mechanism that is not simple, while she loses the ability to predict play, she may nevertheless be better off no matter how agents resolve their strategic confusion.