Optimizing resource allocation

Every year, I go to GenCon: a gaming conference where tens of thousands of nerds descend on Indianapolis to try out new board games, RPGs, and other assorted nerdery. Indianapolis is no stranger to huge conferences, but GenCon stretches the city to its limits. GenCon buys thousands of hotel rooms throughout the city and then doles them out by lottery to the attendees. The hotels closest to the conference center sell out immediately, then it gradually filters out to the further away/more expensive options. A day after GenCon’s housing portal opens, every hotel room in Indianapolis is booked.

Putting up with/hacking around this annoying system for a decade inspired me to create a theory of resource allocation that, while I can’t imagine is original, I’ve never heard anyone else talk about.

When you control a finite resource that a lot of people want, there are three groups that you should allocate it to:

  • The deserving. These are the people you think will best use the resource: artists and superfans and young people who want to go so bad they will wait in line all night. These people might need subsidies (or at least reasonably-priced options) to be able to partake. However, they are expected to materially improve the quality of the conference/neighborhood/magnet school.
  • A random lottery. You think you know what will make a great conference/neighborhood/magnet school, but no one really knows the secret sauce. If you think of the previous group as a garden, this group is the wildflowers.
  • The rich. These people will subsidize the other groups/the event itself. 

Basically all resource allocations can be broken down into some division between these three groups, and the interesting question is “what proportion should deserving vs. lucky vs. rich be?”  They all have different strength and weaknesses.  The rich might not add much of anything culturally.  The deserving may stultify into an old guard that prevents innovation. The randos might be useless.

Right now, GenCon is 99.9% random lottery, with a handful of slots for rich people to get preferential access to housing. This means that they are missing out on a lot of the extra money they could be making from their more well-heeled patrons. They are also excluding a lot of passionate fans getting rooms in preference to someone who is mostly there to hang out in the hot tub.

Covid vaccines are another interesting case. Who should get a vaccine? The breakdown we’ve gone with is the deserving (front line workers, the elderly, etc.) then random. If vaccine rollout is blocked on money, what if providing a rich person with a shot a few weeks early could fund ten shots for front-line workers?  A thousand? A million? If not, is there any number where you’d let someone you didn’t like get a shot early for the sake of humanity?

The problem with letting the rich pay their way in is that it feels so unfair. Lotteries feel fair. Letting in deserving people also feels fair (albeit subject to how deserving-ness is measured). In contrast, it’s infuriating when someone who already has enough gets more benefits. However, if you cut off the ways wealthy people can access a resource, they’re not going to just shrug and give up. They’ll just go outside the system: buy the most desirable hotel rooms a year in advance, send their kid to an expensive private school, or use their connections to get a vaccine.  If we build ways to serve the wealthy in the system, the whole system can benefit from their resources. 

Systems often default to a 0% allocation for the rich, because it feels fairer. However, I think it’s not usually the optimal choice, it’s just the easiest one to make a case for.

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