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The problem of eliciting honest preferences from individuals who must be assigned to a set of positions is considered. Individuals know that they will be charged for the positions to which they are assigned. A set of prices that provide no incentive for the individual to misrepresent his preferences is suggested. It is shown that these prices constitute an element of the optimal solution to the dual of a linear programming assignment problem. Both the optimal allocation and the prices to be charged can be derived by solving two linear programming problems once preferences have been elicited. The procedure can usefully be viewed as a simulation of a competitive market under conditions where such a market cannot be expected to function well. It results in an efficient allocation where all resources are valued at their opportunity costs and "consumer surplus" is maximized; its outcome thus has the desirable properties of competitive market equilibria.
Herman B. Leonard (Wed,) studied this question.