Serial dictatorship: The unique optimal allocation rule when information is endogenous

Abstract

© 2015 Sophie Bade. The study of matching problems typically assumes that agents precisely know their preferences over the goods to be assigned. Within applied contexts, this assumption stands out as particularly counterfactual. Parents typically do invest a large amount of time and resources to find the best school for their children; doctors run costly tests to establish the best kidney for a given patient. In this paper, I introduce the assumption of endogenous information acquisition into otherwise standard house allocation problems. I find that there is a unique ex ante Pareto-optimal, strategy-proof, and nonbossy allocation mechanism: serial dictatorship. This stands in sharp contrast to the very large set of such mechanisms for house allocation problems without endogenous information acquisition.