We consider a budget-constrained mechanism designer who wants to select an optimal subset of projects to maximize her utility. Project
costs are private information and the value the designer derives from their provision may vary. In this allocation problem the choice of
projects - both which and how many - is endogenously determined by the mechanism. The designer faces hard ex-post constraints: The participation and budget constraint must hold for each possible outcome while the mechanism must be implementable in dominant strategies.
We derive the class of optimal mechanisms that are characterized by cutoff functions. These cutoff functions exhibit properties that allow
an implementation through a descending clock auction. Only in the case of symmetric projects price clocks descend synchronously such
that always the cheapest projects are executed. However, the asymmetric case, where values or costs are asymmetrically distributed, features
a novel tradeoff between quantity and quality. Interestingly, this tradeoff mitigates the distortion due to the informational asymmetry
compared to environments where quantity is exogenous.
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Ex-post optimal knapsack procurement. (deposited 29 Jan 2015 08:41)[currently selected]
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