2026/02/28 by Filip Tokarski
Economics, Econometrics and Finance · #econ.TH
arxiv created 2026/07/30 · arxiv updated 2026/07/31
I study the welfare-maximizing allocation of heterogeneous goods when monetary transfers are prohibited. Agents have private values, and the designer chooses a mechanism subject to incentive compatibility and aggregate supply constraints. I first characterize when the optimal mechanism takes the form of a simple menu, where each option offers some amount of one kind of good and none of the others. When this is the case, it can be implemented as a competitive equilibrium with equal incomes or a choice-based lottery. I then characterize the optimal mechanism when there are two kinds of goods and show that it either offers one pure option per good or adds a mixed bundle. Including the bundle is optimal when narrow preference margins between pure options are sufficiently predictive of greater need, allowing the designer to target high-value agents through their willingness to accept mixing.