Market and Non-Market Mechanisms for the Optimal Allocation of Scarce Resources

Daniele Condorelli

No 1483, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: Both market (e.g. auctions) and non-market mechanisms (e.g. lotteries and priority lists) are used to allocate a large amount of scarce public resources that produce large private benefits and small consumption externalities. I study a model in which the use of both market and non-market mechanisms can be rationalized. Agents are risk neutral and heterogeneous in terms of their monetary value for a good and their opportunity cost of money, which are both private information. The designer wants to allocate a set of identical goods to the agents with the highest values. To achieve her goal, she can screen agents on the basis of their observable characteristics, and on the basis of information on their willingness to pay that she can extract using market mechanisms. In contrast to models where willingness to pay and value coincide, a first best cannot be achieved. My main result is that both market and non-market mechanisms, or hybrid mechanisms, can be optimal depending on the prior information available to the designer. In particular, non-market mechanisms may be optimal if the value is positively correlated with the opportunity cost of money.

Date: 2009-11
New Economics Papers: this item is included in nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.kellogg.northwestern.edu/faculty/condorelli/VWASR.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.kellogg.northwestern.edu/faculty/condorelli/VWASR.pdf [301 Moved Permanently]--> https://www.kellogg.northwestern.edu/faculty/condorelli/VWASR.pdf [301 Moved Permanently]--> http://www.kellogg.northwestern.edu/faculty/condorelli/vwasr.pdf [301 Moved Permanently]--> https://www.kellogg.northwestern.edu/faculty/condorelli/vwasr.pdf)

Related works:
Journal Article: Market and non-market mechanisms for the optimal allocation of scarce resources (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nwu:cmsems:1483

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014. Contact information at EDIRC.
Bibliographic data for series maintained by Fran Walker ( this e-mail address is bad, please contact ).