Repeated Resource Allocation; John Yiran Zhu (University of Kansas)

Abstract

A principal repeatedly allocates resources to a set of agents. Each agent is privately endowed with a sequence of projects that use resources to generate payoffs. Ergodicity implies each agent's average endowment likely lies in some restricted confidence interval. I introduce the linked VCG mechanism and show it is the cheapest efficient ex-post mechanism if agents' endowment processes are stylized so that average endowments must lie in those confidence intervals.

Linking VCG mechanisms can yield significant cost savings for the principal, demonstrating how trimming the type space of a mechanism design problem by removing elements known to be unlikely can greatly improve the solution. The attractive properties of the linked VCG mechanism are approximately preserved when the stylized restriction on average endowments is relaxed.

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