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Large mechanism design with moment-based allocation externality

Author

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  • Yamashita, Takuro
  • Sarkisian, Roberto

Abstract

In many mechanism design problems in practice, often allocation externality exists (e.g., peer effects in student allocation, and post-license com- petition in oligopoly). Despite the practical importance, mechanism design with allocation externality has not been much explored in the literature, per- haps due to the tractability issue of the problem. In this paper, we propose a simple and tractable model of mechanism design with allocation externality. We characterize the optimal mechanism, which has a very simple form in the sense that it is identified by only a few parameters. This simplicity of the optimal mechanism is also useful to obtain comparative statics results.

Suggested Citation

  • Yamashita, Takuro & Sarkisian, Roberto, 2021. "Large mechanism design with moment-based allocation externality," TSE Working Papers 21-1241, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:125877
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    References listed on IDEAS

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    Cited by:

    1. Jacopo Bizzotto & Adrien Vigier, 2022. "A Case for Tiered School Systems," Working Papers 202205, Oslo Metropolitan University, Oslo Business School.
    2. Jacopo Bizzotto & Adrien Vigier, 2022. "Sorting and Grading," Papers 2208.10894, arXiv.org, revised Feb 2024.

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    More about this item

    Keywords

    Mechanism design; Allocation externality;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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