Mechanism Design and Assignment Models

FRB Richmond Working Paper No. 03-9

33 Pages Posted: 3 Dec 2012

See all articles by Edward S. Prescott

Edward S. Prescott

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Robert M. Townsend

MIT - Department of Economics

Date Written: July 29, 2003

Abstract

This mechanism design paper studies the assignment of people to projects over time. Inability to communicate interim shocks is a force for long-term assignments, though exceptions exist for high risk aversion. In contrast, costless reporting of interim shocks makes switching powerful for virtually all environments. Switching elicits honest reports and mitigates incentive constraints allowing, in particular, beneficial concealment of project quality. Properties of the production technology are also shown to matter. Substitutability of intertemporal effort is a force for long-term assignments while complementarity with Nash equilibrium strategies is a force for job rotation.

Keywords: assignment, private information, communication

JEL Classification: D82, L23

Suggested Citation

Prescott, Edward (Ned) Simpson and Townsend, Robert M., Mechanism Design and Assignment Models (July 29, 2003). FRB Richmond Working Paper No. 03-9. Available at SSRN: https://ssrn.com/abstract=2184510 or http://dx.doi.org/10.2139/ssrn.2184510

Edward (Ned) Simpson Prescott (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

P.O. Box 6387
Cleveland, OH 44101
United States

HOME PAGE: http://https://www.clevelandfed.org/people-search?pid=f8ca941e-4b51-41f6-95f8-c87f1d3806e5

Robert M. Townsend

MIT - Department of Economics ( email )

Bldg. E52-252c
50 Memorial Drive
Cambridge, MA 02142
United States
617-452-3722 (Phone)
617-253-1330 (Fax)

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