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28.05. Micro Theory Seminar: Yunan Li

Micro Theory Seminar with Yunan Li (Hongkong University)

Event details
  • Micro Theory Seminar
When May 28, 2018
from 12:00 to 13:00
Where faculty room
Contact Name Stephan Lauermann
Contact Email
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„Mechanism Design with Financially Constrained Agents and Costly Verification“



A principal wishes to distribute an indivisible good to a population of budgetconstrained agents. Both valuation and budget are an agent’s private information. The principal can inspect an agent’s budget through a costly verification process and punish an agent who makes a false statement. I characterize the direct surplus-maximizing mechanism. This direct mechanism can be implemented by a two-stage mechanism in which agents only report their budgets. Specifically, all agents report their budgets in the first stage. The principal then provides budget-dependent cash subsidies to agents and assigns the goods randomly (with uniformprobability) at budget-dependent prices. In the second stage, a resale market opens, but is regulated with budget-dependent sales taxes. Agents who report low budgets receive more subsidies in their initial purchases (the first stage), face higher taxes in the resale market (the second stage) and are inspected randomly. This implementation exhibits some of the features of some welfare programs, such as the affordable housing program in Singapore.

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