Australasian Microeconomic Theory Seminar - Piotr Dworczak (Northwestern)

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Alexandru Nichifor

nichifor@unimelb.edu.au

Title: Redistributive Allocation Mechanisms
Abstract: Many scarce public resources are allocated below market-clearing prices (and sometimes for free). Such “non-market” mechanisms necessarily sacrifice some surplus, yet
they can potentially improve equity by increasing the rents enjoyed by agents with
low willingness to pay. In this paper, we develop a model of mechanism design with
redistributive concerns. Agents are characterized by a privately observed willingness
to pay for quality, and a publicly observed label. A market designer controls allocation and pricing of a set of objects of heterogeneous quality, and maximizes a linear
combination of revenue and total surplus—with Pareto weights that depend both on
observed and unobserved agent characteristics. We derive structural insights about the
form of the optimal mechanism and describe how social preferences influence the use
of non-market mechanisms.