Journal Article

Assigning Resources to Budget-Constrained Agents

Yeon-Koo Che, Ian Gale and Jinwoo Kim

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 80, issue 1, pages 73-107
Published in print January 2013 | ISSN: 0034-6527
Published online May 2012 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rds025
Assigning Resources to Budget-Constrained Agents

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  • Information, Knowledge, and Uncertainy
  • Welfare Economics
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This article studies different methods of assigning a good to budget-constrained agents. Schemes that assign the good randomly and allow resale may outperform the competitive market in terms of Utilitarian efficiency. The socially optimal mechanism involves random assignment at a discount—an in-kind subsidy—and a cash incentive to discourage low-valuation individuals from claiming the good.

Keywords: Budget-constrained agents; Random rationing; Resale; Cash subsidy; D02; D45; D61; D82; H42

Journal Article.  17731 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Welfare Economics ; Publicly Provided Goods ; Microeconomics ; Market Structure and Pricing

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