Abstract:

We study the optimal design of fraud-proof allocation mechanisms without transfers. The social value of an allocation is correlated with an observable characteristic of agents who get an object. But this characteristic is falsifiable at a cost by the agents. We characterize the optimal falsification-proof allocation rule under two classes of falsification technologies. These rules involve both wrongful allocation and non-allocation, and are not optimal if falsification is allowed. Our analysis incorporates resource and quota constraints, and we examine the effects of changes in one demographic group on allocation across and within all groups.

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