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American Economic Review Vol. 103 No. 2 2013

Designing Random Allocation Mechanisms: Theory and Applications

Eric Budish1; Yeon‐Koo Che2; Fuhito Kojima3; Paul Milgrom3

1 University of Chicago Booth School of Business, 5807 S. Woodlawn Ave., Chicago, IL 60637. · 2 Department of Economics, Columbia University, 420 West 118th Street, 1016 IAB, New York, NY 10027, and YERI, Yonsei University. · 3 Department of Economics, Stanford University, 450 Serra Mall, Stanford, CA 94305.

Abstract

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.

DOI
10.1257/aer.103.2.585
Volume
103
Issue
2
Pages
585-623
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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