Optimal allocation with costly verification

Elchanan Ben-Porath; Eddie Dekel; Barton L. Lipman

doi:10.1257/aer.104.12.3779

Optimal allocation with costly verification

Elchanan Ben-Porath, Eddie Dekel, Barton L. Lipman

Department of Economics

The Hebrew University of Jerusalem

Research output: Contribution to journal › Article › peer-review

Abstract

A principal allocates an object to one of I agents. Each agent values receiving the object and has private information regarding the value to the principal of giving it to him. There are no monetary transfers, but the principal can check an agent's information at a cost. A favored-agent mechanism specifies a value v∗ and an agent i∗. If all agents other than i∗ report values below v∗, then i∗ receives the good and no one is checked. Otherwise, whoever reports the highest value is checked and receives the good if and only if her report is confirmed. All optimal mechanisms are essentially randomizations over optimal favored-agent mechanisms.

Original language	English
Pages (from-to)	3779-3813
Number of pages	35
Journal	American Economic Review
Volume	104
Issue number	12
DOIs	https://doi.org/10.1257/aer.104.12.3779
State	Published - 1 Dec 2014

All Science Journal Classification (ASJC) codes

Economics and Econometrics

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10.1257/aer.104.12.3779

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Optimal allocation with costly verification

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