Allocation Mechanisms with Mixture-Averse Preferences

David Dillenberger () and Uzi Segal
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David Dillenberger: University of Pennsylvania

No 1065, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Consider an economy with equal amounts of N types of goods, to be allocated to agents with strict quasi-convex preferences over lotteries. We show that ex-ante, all feasible and Pareto efficient al- locations give almost all agents a binary lottery. Therefore, even if all preferences are the same, some identical agents necessarily receive different lotteries. Our results imply that many of the popular alloca- tion mechanisms used in practice are not ex-ante efficient. Assuming the reduction of compound lotteries axiom, social welfare deteriorates by first randomizing over these binary lotteries. Full ex-ante equality can be achieved if agents satisfy the compound independence axiom.

Keywords: Allocation Problem; Binary Lotteries; Ex-Ante Efficiency; Matching; No-Envy; Non-Expected Utility; Quasi-Convex Preferences. (search for similar items in EconPapers)
JEL-codes: C78 D61 D81 (search for similar items in EconPapers)
Date: 2024-03-03
New Economics Papers: this item is included in nep-mic and nep-upt
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