Who Cares More? Allocation with Diverse Preference Intensities

Abstract

Goods and services---public housing, medical appointments, schools---are often allocated to individuals who rank them similarly but differ in their preference intensities. We characterize optimal allocation rules when individual preferences are known and when they are not. Several insights emerge. First-best allocations may involve assigning some agents "lotteries" between high-and low-ranked goods. When preference intensities are private information, second-best allocations always involve such lotteries and, crucially, may coincide with first-best allocations. Furthermore, second-best allocations may entail disposal of services. We discuss a market-based alternative and show how it differs.

Optimal assignment mechanisms with imperfect verification

“…1111 A similar assumption is made in Troyan (2012), Chade, Lewis, and Smith (2014), Hafalir and Mirales (2015), Lien, Zheng, and Zhong (2017), Hafalir et al (2018), Akin (2019), Akbarpour, Kapor, Neilson, and Van Dijk (2022), Dogan and Uyanik (2020), and Ortoleva et al (2021) among others. …”

“…Dogan and Uyanik (2020) study a simplified version of Miralles (2012) and, like us, find that wasteful allocation rules might be optimal. Hafalir and Miralles (2015) and Ortoleva, Safonov, and Yariv (2021) consider models with a continuum of agents and find optimal mechanisms that have features similar to ours. Specifically, agents who have high valuations receive lotteries over objects where there is a large probability of receiving high‐quality objects, but also a high probability of receiving low‐quality objects, while agents with low valuations receive lotteries with a high probability of receiving average quality objects.…”

“…Even though agents have the same ordinal preferences over objects, the fact that they have different cardinal preferences leads to them having different preferences over lotteries of objects. Building on this insight, several authors have used mechanism design techniques to study the problem of finding welfare maximizing incentive compatible allocation rules in settings where agents have common ordinal preferences (Miralles (2012), Hafalir and Miralles (2015), Dogan and Uyanik (2020), Ortoleva, Safonov, and Yariv (2021)).…”

Should the Timing of Inspections be Predictable?

“…Finally, an important force in our paper is the relationship between timeand risk-preferences. Ortoleva et al (2022) exploit this relationship in an adverse selection problem. In their model, the agent's discount rate is private information.…”

Costless Information and Costly Verification: A Case for Transparency

“…29 Allocation mechanisms without money or verification are the focus of Börgers and Postl (2009), Goldlücke andTröger (2018), andOrtoleva, Safonov, andYariv (2021) under independence and of Kattwinkel (2020) under correlation. 30 This relates to Manelli and Vincent (2010) and Gershkov et al (2013), who show equivalence between BIC and dominant-strategy IC mechanisms in settings with monetary transfers and independent information.…”