Often an organization or government must allocate goods without collecting payment in return. This may pose a difficult problem either when agents receiving those goods have private information in regards to their values or needs. In this paper, we find an optimal mechanism to allocate goods when the designer is benevolent. While the designer cannot charge agents, he can receive a costly but wasteful signal from them. We find conditions for cases in which ignoring these costly signals by giving agents equal share (or using lotteries if the goods are indivisible) is optimal. In other cases, those that send the highest signal should receive the goods; however, we then show that there exist cases where more complicated mechanisms are superior. Also, we show that the optimal mechanism is independent of the scarcity of the goods being allocated.
Bibliographical noteFunding Information:
✩ We wish to thank seminar participants at Tel Aviv University, Bar-Ilan University, New Economic School, Technion, University of Exeter, University of Reading, Third Congress of the Game Theory Society, Royal Economic Society Meetings in Warwick, European Summer Meetings of the Econometric Society in Budapest, North American Summer Meetings of the Econometric Society in Boston, Israeli Economic Association Meetings, the Contests, Mechanisms, and Experiments Conference held in Exeter, Electoral Systems and Governance: An Analytic Perspective held at Open University, Israel, and the Dagstuhl fair-division conference. We also wish to thank George-Marios Angeletos, Ian Gale, Arye Hillman, Miltos Makris, Gareth Myles, Binya Shitovitz, Ron Siegel, Eyal Winter, Shmuel Zamir, an associate editor and two anonymous referees for helpful suggestions. Todd Kaplan wishes to thank the Leverhulme Foundation for financial support. * Corresponding author. E-mail addresses: S.Chakravarty@exeter.ac.uk (S. Chakravarty), Dr@ToddKaplan.com (T.R. Kaplan).
- Mechanism design
ASJC Scopus subject areas
- Economics and Econometrics