Abstract
We characterize the structure of optimal assignment rules when both allocative inefficiency and expenditure inefficiency (e.g., rent-seeking) are present. We find that the optimal structure critically depends on how the hazard rate of the value distribution behaves, and that it is often optimal to use probabilistic assignment rules so that the winner of the object is not always the one with the highest valuation. We also find that the inefficiency of the optimal assignment rule decreases as the variability of the value distribution increases.
Original language | English |
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Pages (from-to) | 670-676 |
Number of pages | 7 |
Journal | Journal of Mathematical Economics |
Volume | 47 |
Issue number | 6 |
DOIs | |
Publication status | Published - 2011 Dec |
Keywords
- Expenditure inefficiency
- Mechanism
- Random assignment
- Rank-order rules
- Winner-take-all assignment
ASJC Scopus subject areas
- Economics and Econometrics
- Applied Mathematics