OPTIMAL ALLOCATION WITH EX-POST VERIFICATION AND LIMITED PENALTIES

Tymofiy Mylovanov and Andriy Zapechelnyuk

Working Papers from Business School - Economics, University of Glasgow

Abstract: We study the problem of allocating a prize to one of several agents. The social value of giving the prize to an agent is privately known by this agent. The allocation rule chooses the winner of the prize based on the agents’ reports about these values. After the prize is allocated, the social value of giving the prize to the winner becomes commonly known and the agent can be penalized for lies about the value. We show that, if the number of agents is low, the optimal allocation rule takes the form of a restricted-bid procedure; otherwise, it takes the form of a shortlisting procedure. Examples of applications of this model are grant competitions, scholarship allocations, and hiring for a fixed-salary post.

Keywords: mechanism design without transfers; Matthews-Border constraint; short- listing procedure; verification; limited penalty (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-mic
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Related works:
Journal Article: Optimal Allocation with Ex Post Verification and Limited Penalties (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2016_21

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