An Experimental Examination into the Design of Decentralized Methods to Solve the Assignment Problem with and without Money

Mark Olson and David Porter

Economic Theory, 1994, vol. 4, issue 1, 40 pages

Abstract: An experimental examination of the assignment problem, matching individuals to positions or slots, is conducted in which various assignment mechanisms are analyzed. Generalized versions of both the Vicrey and English auctions are designed to solve the assignment problem along with ordinal ranking mechanisms (serial dictator and "funny" money system). The generalized auctions result in efficient allocations. In contrast, the ordinal ranking mechanisms, which require no monetary transfers, are significantly less efficient in their assignments. However, the efficient allocations obtained from the competitive bidding processes are at the expense of consumers' surplus since demanders retain significantly larger profits with the ordinal ranking mechanisms.

Date: 1994
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