Dynamic Mechanisms without Money

Yingni Guo and Johannes Hörner
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Yingni Guo: Dept. of Economics, Northwestern University

No 1985, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We analyze the optimal design of dynamic mechanisms in the absence of transfers. The designer uses future allocation decisions as a way of eliciting private information. Values evolve according to a two-state Markov chain. We solve for the optimal allocation rule, which admits a simple implementation. Unlike with transfers, efficiency decreases over time, and both immiseration and its polar opposite are possible long-run outcomes. Considering the limiting environment in which time is continuous, we show that persistence hurts.

Keywords: Mechanism design; Principal-Agent; Token mechanisms (search for similar items in EconPapers)
JEL-codes: C73 D82 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2015-02
New Economics Papers: this item is included in nep-cta and nep-mic
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Citations: View citations in EconPapers (13)

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