Resource Allocation with Positive Externalities

22 Pages Posted: 21 Oct 2016 Last revised: 7 Mar 2020

See all articles by Dhruva Bhaskar

Dhruva Bhaskar

Queen Mary University of London

Evan Sadler

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: November 4, 2019

Abstract

In many allocation problems, transfers are unavailable, but incentives are partially aligned due to positive externalities. We study how a designer can exploit this alignment to allocate a resource between n agents. We identify a natural mechanism that partitions types into intervals and allocates among agents in the highest reported interval. While interim allocations are identical for all types in the same interval, the exact allocation depends on the lowest reported interval. This novel feature is a crucial source of incentives. In a class of type distributions, our mechanism is optimal. For any type distribution, our mechanism is approximately efficient when n is large.

Keywords: Mechanism Design, Interdependent Values, No Transfers

JEL Classification: D82, D44, D72

Suggested Citation

Bhaskar, Dhruva and Sadler, Evan, Resource Allocation with Positive Externalities (November 4, 2019). Available at SSRN: https://ssrn.com/abstract=2853085 or http://dx.doi.org/10.2139/ssrn.2853085

Dhruva Bhaskar

Queen Mary University of London ( email )

Mile End Rd
Mile End Road
London, London E1 4NS
United Kingdom

Evan Sadler (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

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