Contingent Payment Mechanisms for Resource Utilization

We introduce the problem of assigning resources to improve their utilization, for settings where agents have uncertainty about their own values for using a resource, and where it is in the interest of the society or the planner that resources be used and not wasted. Done in the right way, improved utilization maximizes social welfare--- balancing the utility of a high value but unreliable agent with the group's preference that resources be used. We introduce the family of contingent payment mechanisms (CP), which may charge an agent contingent on use (a penalty). A CP mechanism is parameterized by a maximum penalty, and has a simple dominant-strategy equilibrium. Under a set of axiomatic properties, we establish welfare-optimality for the special case CP(W), with CP instantiated for a maximum penalty equal to societal value W for utilization. The special case with no upper bound on penalty, the contingent second-price mechanism, maximizes utilization. We extend the mechanisms to assign multiple, heterogeneous resources, and present a simulation study of the welfare properties of these mechanisms.