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Allocating Uncertain and Unresponsive Resources: An Experimental Approach

Banks, Jeffrey S. and Ledyard, John O. and Porter, David P. (1989) Allocating Uncertain and Unresponsive Resources: An Experimental Approach. RAND Journal of Economics, 20 (1). pp. 1-25. ISSN 0741-6261. https://resolver.caltech.edu/CaltechAUTHORS:20160525-065131499

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Abstract

We identify an important class of economic problems that arise naturally in several applications: the allocation of multiple resources when there are uncertainties in demand or supply, unresponsive supplies (no inventories and fixed capacities), and significant demand indivisibilities (rigidities). Examples of such problems include: scheduling job shops, airports, or supercomputers; zero-inventory planning; and the allocation and pricing of NASA's planned Space Station. Using experimental methods, we show that the two most common organizations used to deal with this problem, markets and administrative procedures, can perform at very low efficiencies (60-65% efficiency in a seemingly robust example). Thus, there is a need to design new mechanisms that more efficiently allocate resources in these environments. We develop and analyze two mechanisms that arise naturally from auctions used to allocate single-dimensional goods. These new mechanisms involve computer-assisted coordination made possible by the existence of networked computers. Both mechanisms significantly improve on the performance of administrative and market procedures.


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Additional Information:© 1989 RAND Corporation. This work was partially funded by Caltech and NASA-Jet Propulsion Laboratories. We thank them for their support. They are not responsible for the content. We thank Peter Gray and Mark Olson for computer programming assistance. We also thank Charles Plott, Jim Quirk, and Stan Reiter for helpful insights and discussions.
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Record Number:CaltechAUTHORS:20160525-065131499
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20160525-065131499
Official Citation:Banks, Jeffrey S., Ledyard John O., and Porter David P. "Allocating Uncertain and Unresponsive Resources: An Experimental Approach." The RAND Journal of Economics 20, no. 1 (1989): 1-25. http://www.jstor.org/stable/2555648.
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Deposited On:25 May 2016 14:09
Last Modified:03 Oct 2019 10:05

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