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Generalized Reduced-Form Auctions: A Network-Flow Approach

Econometrica 2013 81(6), 2487-2520 open access
We develop a network-flow approach for characterizing interim-allocation rules that can be implemented by ex post allocations. Our method can be used to characterize feasible interim allocations in general multi-unit auctions where agents face capacity constraints, both ceilings and floors. Applications include a variety of settings of practical interest, ranging from individual and group-specific capacity constraints, set-aside sale, partnership dissolution, and government license reallocation.

Pandering to Persuade

American Economic Review 2013 103(1), 47-79
An agent advises a principal on selecting one of multiple projects or an outside option. The agent is privately informed about the projects' benefits and shares the principal's preferences except for not internalizing her value from the outside option. We show that for moderate outside option values, strategic communication is characterized by pandering: the agent biases his recommendation toward “conditionally better-looking” projects, even when both parties would be better off with some other project. A project that has lower expected value can be conditionally better-looking. We develop comparative statics and implications of pandering. Pandering is also induced by an optimal mechanism without transfers.

Designing Random Allocation Mechanisms: Theory and Applications

American Economic Review 2013 103(2), 585-623
Randomization is commonplace in everyday resource allocation. We generalize the theory of randomized assignment to accommodate multi-unit allocations and various real-world constraints, such as group-specific quotas (“controlled choice”) in school choice and house allocation, and scheduling and curriculum constraints in course allocation. We develop new mechanisms that are ex ante efficient and fair in these environments, and that incorporate certain non-additive substitutable preferences. We also develop a “utility guarantee” technique that limits ex post unfairness in random allocations, supplementing the ex ante fairness promoted by randomization. This can be applied to multi-unit assignment problems and certain two-sided matching problems.