Optimal Dynamic Allocation: Simplicity through Information Design

52 Pages Posted: 2 Jul 2020 Last revised: 29 Jul 2021

See all articles by Itai Ashlagi

Itai Ashlagi

Stanford University - Department of 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 dynamic nonmonetary markets where objects are allocated to unit-demand agents with private types. An agent’s value for an object is supermodular in her type and the quality of the object, and her payoff is quasilinear in her waiting cost. We identify the welfare-maximizing mechanism in the class of direct-revelation mechanisms that elicit agents’ types and assign them to objects over time. When the social planner can design the information disclosed to the agents about the objects, this mechanism can be implemented by a first-come first-served wait-list with deferrals. The optimal disclosure policy pools adjacent object types. Moreover, the hazard rate of the distribution of the agents’ types determines the structure of the optimal disclosure policy, when the agents’ utility function is separable. A single-peaked (single-dipped) hazard rate leads to the optimality of a lower censorship (upper censorship) policy.

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 or http://dx.doi.org/10.2139/ssrn.3610386

Itai Ashlagi

Stanford University - Department of 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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