Redistributive Allocation Mechanisms

39 Pages Posted: 18 Jun 2020

See all articles by Mohammad Akbarpour

Mohammad Akbarpour

Stanford University

Piotr Dworczak

Northwestern University - Department of Economics

Scott Duke Kominers

Harvard University

Date Written: May 23, 2020

Abstract

Many scarce public resources are allocated below market-clearing prices (and sometimes for free). Such "non-market" mechanisms necessarily sacrifice some surplus, yet they can potentially improve equity by increasing the rents enjoyed by agents with low willingness to pay. In this paper, we develop a model of mechanism design with re-distributive concerns. Agents are characterized by a privately observed willingness to pay for quality, and a publicly observed label. A market designer controls allocation and pricing of a set of objects of heterogeneous quality, and maximizes a linear combination of revenue and total surplus — with Pareto weights that depend both on observed and unobserved agent characteristics. We derive structural insights about the form of the optimal mechanism and describe how social preferences influence the use of non-market mechanisms.

Keywords: optimal mechanism design, redistribution, inequality, welfare

JEL Classification: C78, D47, D61, D63, D82

Suggested Citation

Akbarpour, Mohammad and Dworczak, Piotr and Kominers, Scott Duke, Redistributive Allocation Mechanisms (May 23, 2020). Available at SSRN: https://ssrn.com/abstract=3609182 or http://dx.doi.org/10.2139/ssrn.3609182

Mohammad Akbarpour

Stanford University ( email )

Piotr Dworczak

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

Scott Duke Kominers (Contact Author)

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

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

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