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Abstract: Consider a cost sharing problem of a central resource and n individual agents. The main insight of this paper is that any efficient allocation rule must reflect the shape of the underlying cost structure. We propose a new allocation rule (the polynomial rule), which achieves efficiency and approximate budget balance. Welfare losses due to linear allocation rules increase with firm size, so polynomial allocation rules dominate linear rules for larger firms.
Bio: Korok Ray is an economist on the faculty of the Mays Business School at Texas A&M University. He has a PhD in economics from Stanford University. He has taught previously at the University of Chicago and Georgetown University. He also served as the senior economist on the Council of Economic Advisors in the Bush White House from 2007 to 2009, holding front row seats to the financial crisis and the government response. Korok’s research lies in the area of compensation and performance measurement. He studies this at the level of executives, managers, and online freelancers. His research bridges the divide between economics and computer science, seeking to use tools from artificial intelligence to better design contracts and marketplaces that can lead to better performance measurement of labor. He has published his research in the Journal of Accounting Research, the Accounting Review, the Journal of Corporate Finance, Management Science and other scholarly outlets. He regularly writes and speaks about new online labor markets that will fundamentally transform business and society in the years ahead.