Optimal Dynamic Allocation: Simplicity through Information Design

54 Pages Posted: 2 Jul 2020

See all articles by Itai Ashlagi

Itai Ashlagi

Stanford University - Management Science & Engineering

Faidra Monachou

Stanford University, Department of Management Science & Engineering

Afshin Nikzad

University of Southern California, Department of Economics

Date Written: February 15, 2020

Abstract

We study mechanism design in dynamic nonmonetary markets where objects are allocated to unit-demand agents with private types and quasi-linear payoffs in their waiting costs. We consider a general class of mechanisms that determine the joint distribution of the object assigned to each agent and the agent’s waiting time. We identify the optimal mechanism, and show that it can be implemented by a simple policy when the market maker can design the information disclosed about the objects: by a first-come, first-served waitlist that allows agents to accept or decline offers paired with an information disclosure scheme that pools adjacent object types. From a technical perspective, our results build upon the ironing technique of Myerson [1981] and Toikka [2011] and generalize it to the design of optimal steady-state matching mechanisms in a setting with waiting times and multiple types of objects. We extend our findings to settings where agents have heterogeneous outside options or may depart the market unmatched due to an exogenous event.

JEL Classification: C78, D47

Suggested Citation

Ashlagi, Itai and Monachou, Faidra and Nikzad, Afshin, Optimal Dynamic Allocation: Simplicity through Information Design (February 15, 2020). Available at SSRN: https://ssrn.com/abstract=3610386

Itai Ashlagi

Stanford University - Management Science & Engineering ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

Faidra Monachou

Stanford University, Department of Management Science & Engineering ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

Afshin Nikzad (Contact Author)

University of Southern California, Department of Economics ( email )

Los Angeles, CA 90066
United States

HOME PAGE: http://afshin-nikzad.com

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