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[Lecture] Mechanism Design with Financially Constrained Agents and Costly Verification

MAR . 22 2018
Topic: Mechanism Design with Financially Constrained Agents and Costly Verification

Speaker: Assistant Professor Li Yunan (City University of Hong Kong)

Time: March 22, 2018 (Thursday)

Venue: Wanzhong Building, National School of Development

Abstract: 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.

Bio: Dr. Yunan Li received her Ph.D. in Economics from the University of Pennsylvania. Prior to her doctoral study, she obtained her MA in Economics from Tsinghua University and BA in Economics from Fudan University. Her main research interests include microeconomic theory, mechanism design, auction theory, contract theory and information economics.