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Mechanism design and assignment models

Edward Prescott () and Robert Townsend

No 03-09, Working Paper from Federal Reserve Bank of Richmond

Abstract: This mechanism design paper studies the assignment of people to projects over time. Inability to communicate interim shocks is a force for long-term assignments, though exceptions exist for high risk aversion. In contrast, costless reporting of interim shocks makes switching powerful for virtually all environments. Switching elicits honest reports and mitigates incentive constraints allowing, in particular, beneficial concealment of project quality. Properties of the production technology are also shown to matter. Substitutability of intertemporal effort is a force for long-term assignments while complementarity with Nash equilibrium strategies is a force for job rotation.

Keywords: Production; (Economic; theory) (search for similar items in EconPapers)
Date: 2003
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Handle: RePEc:fip:fedrwp:03-09