Scarce goods (donor organs, public housing, etc.) are often allocated through waiting lists, especially when monetary transfers are undesirable. Arriving objects are offered to priority-ordered agents who may defer the object to the next agent in line in order to wait for a better one. We consider the welfare implications of arbitrarily influencing such deferral decisions (by force, by “nudging,” etc.). When agents are patient, uninfluenced (equilibrium) behavior is Pareto-dominant; this conclusion strengthens as agents’ risk-aversion increases. When risk-neutral agents are impatient, however, influence results in a welfare tradeoff between earlier and later agents in the queue. The results have implications for the “organ spoilage” problem in waiting lists for donor organs, where useful lower-quality organs spoil in the time that it takes to process the deferrals by agents early in the queue. Removing the right to defer such organs appears to solve the wastage problem by increasing utilization. But for some parameters (e.g. extremely high risk-aversion) such solutions could paradoxically lower the welfare of some agents it is intended to help. Fortunately the parameters that result in this phenomenon appear to be atypical in real world settings.
|Original language||English (US)|
|Number of pages||41|
|Publication status||Published - May 16 2016|