Efficient Resource Allocation on the Basis of Priorities

Many institutions allocate resources by non-market mechanisms based on priorities. In this paper, we introduce a model of resource allocation on the basis of priorities and address the following questions: Is it possible to allocate resources on the basis of any priority structure? If yes, when can we do this Pareto efficiently, without creating incentives for manipulation and consistently across different groups of agents and resource levels? We adopt a basic indivisible-objects model with a finite number of object types and a finite quota of goods of each type. Some interesting examples are the determination of access to education, allocation of graduate houses, offices or tasks. Agents are assumed to have strict preferences over object types and remaining unassigned. An assignment is an allocation of the objects to the agents such that every agent receives at most one object. A rule associates an assignment to each preference profile. We formalize a priority structure to be a collection of strict priority rankings of individuals indexed by the object types where i a j would be read as “i has higher priority for object a than j”. We assume that the priority structure is exogenously fixed and allow the preferences of the agents to vary. A rule is said to violate a priority of i for a if there is a preference profile under which i envies j who is assigned a and ∗Publication Information: Econometrica, 70(6), November 2002, 2489-2497. The copyright to this article is held by the Econometric Society, http://www.econometricsociety.org. It may be downloaded, printed and reproduced only for personal or classroom use. Absolutely no downloading or copying may be done for, or on behalf of, any for-profit commercial firm or other commercial purpose without the explicit permission of the Econometric Society. For this purpose, contact Julie P. Gordon, Executive Director of the Society, at: jpg@northwestern.edu. †I would like to thank Faruk Gul, Wolfgang Pesendorfer, the co-editor, the four anonymous referees, and the participants of the micro theory lunch seminar in Princeton University for their comments and suggestions.