Optimal allocation with ex post verification and limited penalties
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Several agents with privately known social values compete for a prize. The prize is allocated based on the claims of the agents, and the winner is subject to a limited penalty if he makes a false claim. If the number of agents is large, the optimal mechanism places all agents above a threshold onto a shortlist along with a fraction of agents below the threshold, and then allocates the prize to a random agent on the shortlist. When the number of agents is small, the optimal mechanism allocates the prize to the agent who makes the highest claim, but restricts the range of claims above and below.
Mylovanov , T & Zapechelnyuk , A 2017 , ' Optimal allocation with ex post verification and limited penalties ' American Economic Review , vol 107 , no. 9 , pp. 2666-2694 . DOI: 10.1257/aer.20140494
American Economic Review
Copyright © 2017 AEA. This work has been made available online in accordance with the publisher’s policies. This is the author created accepted version manuscript following peer review and as such may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1257/aer.20140494
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