How to Allocate Money?

Dworczak, Piotr

doi:10.1257/mic.20230263

Abstract

I study a simple equity-efficiency problem: A designer allocates a fixed amount of money to a population of agents differing in privately observed marginal values for money. She can only screen by imposing an 鈥渙rdeal,鈥� that is, by allocating more money to agents who engage in a socially wasteful activity. I show that giving a lump-sum transfer is outperformed by an ordeal mechanism when agents with the lowest money-denominated cost of engaging in the wasteful activity have an expected value for money that exceeds the average value by more than a factor of two.

蝌蚪网

蝌蚪网 Journal:
Microeconomics