Equity-efficiency trade-off in quasi-linear environments
Piotr Dworczak presented Equity-efficiency trade-off in quasi-linear environments, part of our IMD project, during ASSA2023 in New Orleans. Piotr studies a simple equity-efficiency problem: a designer allocates a fixed amount of money to a population of agents differing in privately observed marginal values for money. She can only screen agents by asking them to burn utility (through some socially wasteful activity).
Piotr shows that giving a lump-sum payment is outperformed by a mechanism with utility burning when the agent with the lowest money-denominated cost of engaging in the wasteful activity has an expected value for money that exceeds the average value by more than a factor of two.