Redistributive Allocation Mechanisms

Mohammad Akbarpour, Piotr Dworczak and Scott Duke Kominers

Journal of Political Economy, 2024, vol. 132, issue 6, 1831 - 1875

Abstract: Many scarce public resources are allocated at below-market-clearing prices and sometimes for free. Such “nonmarket” mechanisms sacrifice some surplus, yet they can potentially improve equity. We develop a model of mechanism design with redistributive concerns. Agents are characterized by a privately observed willingness to pay for quality, a publicly observed label, and a social welfare weight. A market designer controls allocation and pricing of a set of objects of heterogeneous quality and maximizes the expectation of a welfare function. The designer does not directly observe individuals’ social welfare weights. We derive structural insights about the form of the optimal mechanism, leading to a framework for determining how and when to use nonmarket mechanisms.

Date: 2024
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Working Paper: Redistributive allocation mechanisms (2020)
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