Raffles

23 Pages Posted: 15 Feb 2017  

Date Written: February 13, 2017

Abstract

We propose a simple and practical "raffle" mechanism for allocating a limited supply of heterogeneous goods among unit demand consumers. While the mechanism is inspired by the common "tricky tray" raffle and a housing allocation system in Singapore, it has not been analyzed before, perhaps because of the subtle structure of its exact equilibria. Every consumer is given perfectly divisible "tickets" she can place into a fully transparent "bucket" for any of the goods. Once all consumers are satisfied with their allocations given others', the administrator sequentially pulls tickets from the bucket that is most popular relative to available prizes until these are exhausted. We propose a notion of approximate Pareto efficiency and show that with a continuum of consumers, raffles are approximately Pareto efficient, in contrast to standard ordinal mechanisms which may achieve arbitrarily large losses of cardinal welfare. In simulations, raffles appear to perform similarly to the ideal mechanism proposed by Hylland and Zeckhauser (1979), which may be challenging for unsophisticated consumers to interact with and has not been used in practice, and often better than ordinal mechanisms.

Keywords: random assignment, cardinal utility, raffles, approximate Pareto efficiency, price of anarchy

JEL Classification: D47, D61, C78, D82, C62, C68

Suggested Citation

Immorlica, Nicole and Lucier, Brendan and Mollner, Joshua and Weyl, E. Glen, Raffles (February 13, 2017). Available at SSRN: https://ssrn.com/abstract=2916337 or http://dx.doi.org/10.2139/ssrn.2916337

Nicole Immorlica

Microsoft Research ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

Brendan Lucier

Microsoft Research ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

Joshua Mollner

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Eric Glen Weyl (Contact Author)

Microsoft Research ( email )

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7th Floor
New York, NY 10011
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(857) 998-4513 (Phone)

HOME PAGE: http://www.glenweyl.com

Yale University ( email )

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New Haven, CT 06520-8268
United States

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