Designing Efficient Resource Sharing For Impatient Players Using Limited Monitoring

TL;DR

This paper explores how limited monitoring and impatient users can still lead to efficient long-term resource sharing through a strategic design of monitoring structures, even when short-term efficiency is impossible.

Contribution

It introduces a framework where a designer optimally chooses monitoring structures to enable efficient long-term sharing despite limited signals and impatient users.

Findings

Efficient long-term sharing is possible with limited monitoring.

Impatience does not prevent achieving efficiency in the long run.

Explicit strategies can be constructed for equilibrium under these conditions.

Abstract

The problem of efficient sharing of a resource is nearly ubiquitous. Except for pure public goods, each agent's use creates a negative externality; often the negative externality is so strong that efficient sharing is impossible in the short run. We show that, paradoxically, the impossibility of efficient sharing in the short run enhances the possibility of efficient sharing in the long run, even if outcomes depend stochastically on actions, monitoring is limited and users are not patient. We base our analysis on the familiar framework of repeated games with imperfect public monitoring, but we extend the framework to view the monitoring structure as chosen by a designer who balances the benefits and costs of more accurate observations and reports. Our conclusions are much stronger than in the usual folk theorems: we do not require a rich signal structure or patient users and provide an explicit online construction of equilibrium strategies.