Unambiguous Efficiency of Random Allocations

Abstract

When allocating indivisible objects via lottery, planners often use ordinal mechanisms, which elicit agents' rankings of objects rather than their full preferences over lotteries. In such an ordinal informational environment, planners cannot differentiate between utility profiles that induce the same ranking of objects. We propose the criterion of unambiguous efficiency: regardless of how each agent extends their preferences over objects to lotteries, the allocation is Pareto efficient with respect to the extended preferences. We compare this with the predominant efficiency criterion used for ordinal mechanisms. As an application to mechanism design, we characterize all efficient and strategy-proof mechanisms satisfying certain regularity conditions.