Serial dictatorship mechanisms with reservation prices
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Serial dictatorship mechanisms with reservation prices Bettina Klaus1 · Alexandru Nichifor2 Received: 7 April 2018 / Accepted: 8 August 2019 © Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract We propose a new set of mechanisms, which we call serial dictatorship mechanisms with individual reservation prices for the allocation of homogeneous indivisible objects, e.g., specialist clinic appointments. We show that a mechanism ϕ satisfies minimal tradability, individual rationality, strategy-proofness, consistency, independence of unallocated objects, and non-wasteful tie-breaking if and only if there exists a reservation price vector r and a priority ordering such that ϕ is a serial dictatorship mechanism with reservation prices based on r and . We obtain a second characterization by replacing individual rationality with non-imposition. In both our characterizations r , , and ϕ are all found simultaneously and endogenously from the properties. Finally, we illustrate how our model, mechanism, and results capture the normative requirements governing the functioning of some real-life markets and the mechanisms that these markets use. Keywords Serial dictatorship · Individual reservation prices · Priority ordering · Axiomatic characterization · Strategy-proofness · Consistency JEL Classification C78 · D47 · D71
We thank the editor (Nicholas Yannelis), an anonymous referee, David Delacrétaz, Fuhito Kojima, and Steven Williams for helpful discussions and suggestions. Bettina Klaus gratefully acknowledges financial support from the Swiss National Science Foundation (SNFS), Project 100018_162606. Alexandru Nichifor gratefully acknowledges financial support via the Australian Research Council’s Discovery Early Career Researcher Award (DECRA), Project DE170101183.
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Bettina Klaus [email protected] Alexandru Nichifor [email protected]
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Faculty of Business and Economics, University of Lausanne, Internef, 1015, Lausanne, Switzerland
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Faculty of Business and Economics, University of Melbourne, 111 Barry Street, Parkville, VIC 3010, Australia
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B. Klaus, A. Nichifor
1 Introduction In many markets the resources to be allocated are overdemanded. The rationing does not always happen through market mechanisms, which leads to inefficiencies, i.e., the objects or services are typically not allocated to the agents who value them, and can pay, the most. In such markets, priority orderings (e.g., consumer queues, waiting lists, and so on) often emerge as the primary criteria for rationing the demand, with payments being only secondary. Given the private and social costs of the inherent inefficiencies, why do such markets exist? One possible explanation is that priority orderings may be preferred because they capture social values such as egalitarianism and orderliness (Mann 1969). When objects or services to be allocated are some form of basic needs, priority orderings may be regarded as a just procedure (Konow 2003). Along the same lines, recent experiments show that agents’ preferences extend
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