How to Allocate Money?
Abstract
I study a simple equity-efficiency problem: A designer allocates a fixed amount of money to a population of agents differing in privately observed marginal values for money. She can only screen by imposing an “ordeal”—that is, by allocating more money to agents who engage in a socially wasteful activity (such as queuing or filling out forms). Giving a lumpsum transfer is outperformed by an ordeal mechanism when agents with the lowest money-denominated cost of engaging in the wasteful activity have an expected value for money that exceeds the average value by more than a factor of two. (JEL D63, D82, H23, I38)
Fields of Study & Subjects
Economic theories and models
Auction Theory and Applications
Game Theory and Voting Systems
Publication details
- Journal / source
- American Economic Journal Microeconomics
- Publisher
- American Economic Association
- Volume
- 18
- Issue
- 1
- Pages
- 312–339
- Publication date
- 28 January 2026
- Language
- EN