Targeting Without Transfers

Filip Tokarski

Papers from arXiv.org

Abstract: I study the welfare-maximizing allocation of heterogeneous goods when monetary transfers are prohibited. Agents have private values, and the designer chooses a mechanism subject to incentive compatibility and aggregate supply constraints. I characterize the optimal mechanism for two kinds of goods, and show that it either offers one pure option per good or adds a bundle that delivers a larger total quantity. Including the bundle is optimal when narrow preference margins between goods are sufficiently predictive of greater need, allowing the designer to target high-value agents through their willingness to accept mixing. I then consider the case with N types of goods and characterize when the optimal mechanism takes the form of a simple menu, where each option offers some amount of one kind of good and none of the others. When this is the case, it can be implemented as a competitive equilibrium with equal incomes or a choice-based lottery.

Date: 2026-01, Revised 2026-05
New Economics Papers: this item is included in nep-des and nep-mic
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