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Dynamic Allocation and Pricing
 Arne Ryde Memorial Lectures Series

1. Seven Schools of Macroeconomic Thought

Edmund S. Phelps
2. High Inflation
Daniel Heymann and Axel Leijonhufvud
3. Bounded Rationality in Macroeconomics
Thomas J. Sargent
4. Computable Economics
Kumaraswamy Vellupillai
5. Rational Risk Policy
W. Kip Viscusi
6. Strategic Learning and Its Limits
H. Peyton Young
7. The Equilibrium Manifold: Postmodern Developments in the Theory of
General Economic Equilibrium
Yves Balasko
8. Empirical Model Discovery and Theory Evaluation: Automatic Selection
Methods in Econometrics
David F. Hendry and Jurgen A. Doornik
9. Dynamic Allocation and Pricing: A Mechanism Design Approach
Alex Gershkov and Benny Moldovanu
Dynamic Allocation and Pricing: A Mechanism
Design Approach

Alex Gershkov and Benny Moldovanu

The MIT Press

Cambridge, Massachusetts
London, England

c 2014 Massachusetts Institute of Technology

All rights reserved. No part of this book may be reproduced in any form by any electronic or me-
chanical means (including photocopying, recording, or information storage and retrieval) without
permission in writing from the publisher.

MIT Press books may be purchased at special quantity discounts for business or sales promotional
use. For information, please email special sales@mitpress.mit.edu.

This book was set in Times Roman by diacriTech, Chennai. Printed and bound in the United
States of America.

Library of Congress Cataloging-in-Publication Data

Gershkov, Alex.
Dynamic allocation and pricing: a mechanism design approach / Alex Gershkov and
Benny Moldovanu.
pages cm. – (Arne Ryde memorial lectures)
Includes bibliographical references and index.
ISBN 978-0-262-02840-0 (hardcover : alk. paper) 1. Revenue management. 2. Pricing.
3. Assignment problems (Programming) I. Moldovanu, Benny. II. Title.
HD60.7.G47 2014
658.15’54—dc23
2014016709
10 9 8 7 6 5 4 3 2 1
I dedicate this book to my parents, Michael Gershkov and
Hana Rafelson.—A.G.

I dedicate this book to my mother, Erna Moldovanu, and to the memory

of my father, Liviu Moldovanu.—B.M.
Contents

About the Arne Ryde Foundation ix

Acknowledgments xi

1 Introduction 1
2 The Sequential Assignment of Heterogeneous Objects 11
3 Dynamic Revenue Maximization with Heterogeneous Objects 41
4 The Stochastic and Dynamic Knapsack Model 73
5 Learning and Dynamic Efficiency 105
6 Long-lived Agents 151

Bibliography 181
Index 191
About the Arne Ryde Foundation

Arne Ryde was an exceptionally promising student in the PhD program at the
Department of Economics, Lund University. He was tragically killed in a car
accident in 1968 at the age of twenty-three.
The Arne Ryde Foundation was established by his parents, pharmacist
Sven Ryde and his wife Valborg, in commemoration of Arne Ryde. The aim of
the Foundation, as given in the deed from 1971, is to foster and promote advan-
ced economic research in cooperation with the Department of Economics at
Lund University. The Foundation acts by lending support to conferences, sym-
posia, lecture series, and publications that are initiated by faculty members of
the department.
Acknowledgments

We are grateful to the European Research Council (Advanced Investigator

Grant 246648DMD) and to the Arne Ryde foundation for financial support. We
wish to thank Anders Borglin and Bo Larsson for organizing the lecture series
on which this book is based. We thank Deniz Dizdar for the research coopera-
tion on the topics covered in chapter 3. Andy Klein, Dimitry Knyazev, Holger
Herbst, Benjamin Schickner, Wili Rivinius, and Michael Metzger read parts of
the manuscript and made numerous comments. Kamil Lukas Dorn, Sebastian
Elgass, Marius Beuth, and Marian Alexander Dreher assisted us with Tex for-
matting. We are also grateful to John Covell at the MIT Press and to three
anonymous referees for their very helpful remarks that improved the quality of
the exposition.
Alex Gershkov would like to thank his wife Marina, and his sons Ariel,
Tomer, and Daniel for their continuing support. Benny Moldovanu would like
to thank his mother Erna, his wife Iris, and his daughters Dana and Noa for
their continuing support, and in particular, over the recent period of long
illness.
1 Introduction

Dynamic allocation and pricing problems appear in numerous frameworks

such as the retail of seasonal/style goods, the allocation of fixed capacities
in the travel and leisure industries (e.g., airlines, hotels, rental cars, holiday
resorts), the allocation of a fixed inventory of equipment in a given period of
time (e.g., equipment for medical procedures, bandwidth or advertising space
in online applications), and the assignment of personnel to incoming tasks.
Although dynamic pricing is a very old technique (think about haggling in a
bazaar!), modern revenue management (RM) techniques started with the US
Airline Deregulation Act of 1978 (see McAfee and te Velde 2007). A major
academic textbook is The Theory and Practice of Revenue Management by
Talluri and van Ryzin (2004). According to these authors, the basic RM issues
are as follows:

1. Quantity decisions How to allocate capacity/output to different seg-

ments, products or channels? When to withhold products from the market?
2. Structural decisions Which selling format to choose (posted prices,
negotiations, auctions, etc.)? Which features to use for a particular format
(segmentation, volume discounts, bundling, etc.)?
3. Pricing decisions How to set posted prices, reserve prices? How to price
differentiate? How to price over time? How to mark down over life time?
Broadly speaking, all three questions deal with issues treated in the
auction/mechanism design literature (e.g., see Milgrom’s textbook; Milgrom
2004). Nevertheless, mechanism design has not been the tool of choice in RM:
instead, most studies have focused on analyzing properties of restricted classes
(sometime intuitive, sometimes rather ad hoc) of allocation/pricing schemes.
One possible explanation for this gap is that the classical auction/mechanism
design literature had a strong focus on static models, whereas the emphasis in
RM is on dynamics.
2 Chapter 1

Thus what is necessary for a modern theory of RM is a blend of elegant

dynamic models from operations research, management science, and computer
science literature (i.e., with historical focus on grand, centralized optimiza-
tion and/or ad hoc mechanisms) with the classical mechanism design literature
(i.e., with historical focus on information/incentives in static settings). Such a
blend would have numerous valuable applications. Recently this challenge has
been addressed by a more or less systematic body of work appearing under the
heading of dynamic mechanism design.1
In this chapter we illustrate how this approach would work, based on our
own recent efforts on the topic. We start with well-known, complete informa-
tion, nonstrategic dynamic models directly taken from the OR/management
science literature. For these models elegant, explicit solutions to the under-
lying dynamic optimization problems are available. We add privately in-
formed, strategic agents and examine the consequences of these changes on
the optimization problem of the designer. The present combination allows a
clear, explicit picture of the delicate interplay between dynamic trade-offs and
strategic incentives.2 It is often the case that the ensuing design problems are
relatively complex, requiring tools from advanced areas of mechanism design
such as multidimensional signals, or interdependent values. The main topics
discussed in the book are summarized below. We include a discussion of the
related literature at the end of each chapter of point the header to many other
relevant and important contributions that, due to space limitations, cannot be
reviewed fully in the book.

1.1 Chapter 2: The Sequential Assignment of Heterogeneous Objects

Much of chapter 2 comes from Gershkov and Moldovanu (2010, 2012). In the
chapter we present efficient, individual-rational and budget-balanced schemes
for a specific dynamic mechanism design problem: the designer wants to assign
a fixed, finite set of heterogeneous objects to a sequence of randomly arriving
agents with privately known characteristics. Monetary transfers are feasible.
The objects are substitutes, and each agent derives utility from at most one
object. Moreover all agents share a common ranking over the available objects,
and values for objects have a multiplicative structure, involving the agents’
types and objects’ qualities.
Examples of such settings include the dynamic allocation of limited re-
sources among incoming projects, the allocation of limited research facilities
among research units, the assignment of dormitory rooms to potential tenants,
and the allocation of available positions to arriving candidates. It is often the
Introduction 3

case that positions in an organization’s hierarchy cannot be re-assigned without

very high penalties. The yield management literature has analyzed the simpler
model of allocating identical objects (seats on an aeroplane, hotel rooms, etc.)
from a revenue-maximization perspective. Our model also shares several com-
mon features with the classical job search models. The main difference is that
in the search literature it is usually assumed that the stream of job offers is
generated by a nonstrategic player, without private information. Hence imple-
mentation issues do not arise.3
The assumption of nonstrategic arrivals is an important limitation of the
model. But many of the model’s features do appear in practical situations of
interest. For example, customers in duty-free or central railway station shops
are impatient, “short-lived,” and exhibit nonstrategic arrivals. Shopping in
“mega-markets” situated outside population agglomerations (thus requir-
ing long travel) present similar characteristics. Perishable items (flowers,
food, seasonal apparel, etc.) sold in such shops have limited shelf lives.
Similarly, every evening hotels face “last-minute” nonstrategic travelers in
need of a room, so hotels’ allocation/pricing policies change early in the
evening based on their vacancy rates.
Compared to a static setting, the new trade-off is between an assignment
today and the option of assigning it in the future, possibly to an agent who
values it more. Since the arrival process of agents is stochastic, the “future”
determining option value depends may never materialize (if there is a cutoff
date), or it may be farther away in time and thus discounted. Incomplete infor-
mation in a similar, but static model with nonrandom demand is introduced in
the classic paper by Mussa and Rosen (1978) in whose analysis a monopolist
faces price/quality decisions.
Efficient dynamic allocation under complete information is analyzed by
Derman, Lieberman, and Ross (1972) for the discrete-time case, and via a sys-
tem of differential equations by Albright (1974) for the continuous-time case.
We derive associated menus of prices (one menu for each point in time, and
for each subset of remaining objects) that implement their first-best solutions,
yielding a dynamic version of the Vickrey–Clarke–Groves mechanism. For
the study of efficient, individual rational and budget-balanced mechanisms
in our frameworks, we distinguish between two scenarios: (1) both physical
assignments and monetary payments must take place upon the agents’ arrival;
(2) payments can be postponed to later stages. While in the second scenario a
balanced budget can always be reached, in the first scenario a balanced budget
can only be reached asymptotically as the arrival rate (or the time up to the
deadline) increases without bound.
4 Chapter 1

1.2 Chapter 3: Dynamic Revenue Maximization with

Heterogeneous Objects

Chapter 3 is mostly based on Gershkov and Moldovanu (2009a, 2010). We

advance our analysis to revenue maximization while keeping the basic model
of the preceding chapter fixed (with continuous time and a target date4 ). We
show how certain features of the revenue-maximizing policy can be used to
obtain a direct solution to the larger optimization problem where the designer
must choose the size and quality composition of his/her inventory.
The main contributions are as follows:

1. By allowing for heterogeneous objects, we can combine quantity/quality

optimization with the pricing considerations, analyzing optimization under
stochastic demand conditions as have been traditionally the focus of the
literature in economics and management science.
2. Out technical method has two components: A payoff equivalence principle
with a focus on implementable policies rather than prices and a variational
method that obtains new results even for the much studied case of dynamic
revenue maximization of identical goods, and thus yields more insight than
the traditional dynamic programming/Bellman’s equation approach.
3. Our analysis yields testable implications about the pattern of prices in situ-
ations exhibiting fixed inventories of substitute goods that need to be sold
by a certain date. An example of clearance sales for apparel is presented.

Unlike the large literature on yield and revenue management that has
directly focused on revenue-maximizing pricing (as in the special case of
our model where agents have linear, private values for identical objects), our
approach is based on the characterization of all dynamically implementable,
nonrandomized allocation policies. We compute the revenue generated by
any individual—rational, deterministic, Markovian, and implementable allo-
cation policy. Then we use variational arguments to characterize the revenue-
maximizing allocation policy. The associated optimal prices are of secondary
importance, since they are determined by the implementation conditions. This
is an illustration of the famous payoff equivalence theorem, going back to the
work of Vickrey (1961) and Myerson (1981).
Although the optimal prices generally depend on the composition of
inventory, our main result is that at each point in time, the revenue-maximizing
allocation policy depends only on the size of the available inventory, and not
on its exact composition. We conclude with applications to the larger opti-
mization problem where, before sales begin, the seller chooses both the size
Introduction 5

and composition of the inventory, and to a characterization of the price pattern

for different qualities in clearance sales.

1.3 Chapter 4: The Stochastic Knapsack Model

Chapter 4 is mainly based on Dizdar, Gershkov, and Moldovanu (2011). We

study revenue maximization in a model where agents have multi-unit demand.
The nature of the complete-information optimization problem resembles the
classical knapsack problem. The knapsack problem is a standard combinatorial
optimization problem with numerous practical applications: several objects
with known capacity needs (or weights) and known values must be packed
in a “knapsack” of given capacity in order to maximize the total value of the
included objects. In the dynamic and stochastic version (see Ross and Tsang
1989), objects sequentially arrive over time and their weight/value combina-
tion is stochastic but becomes known to the designer at arrival times. Objects
cannot be recalled later, so it must be decided upon arrival whether or not an
object is to be included. Several such applications are logistic decisions in the
freight transportation industry, the allocation of fixed capacities in the travel
and leisure industries (e.g., airlines, trains, hotels, and rental cars), the alloca-
tion of fixed equipment or personnel in a given period of time (e.g., equipment
and personnel for medical procedures in an emergency), the allocation of fixed
budgets to investment opportunities that appear sequentially, the allocation of
R&D funds to emerging ideas, the allocation of dated advertising space on web
portals.
Here we add incomplete information to the dynamic and stochastic setting
with heterogeneous capacity requests. This way we obtain a dynamic monopo-
listic screening problem: there is a finite number of periods, and at each period
a request for capacity arrives from an agent that is impatient and privately
informed about both his valuation per unit of capacity and the needed capaci-
ty.5 Each agent derives positive utility if he gets the needed capacity (or more),
and zero utility otherwise. The designer accepts or rejects the requests in order
to maximize the revenue obtained from the allocation.
We first characterize implementable policies, which requires us to deal
with a model where information is multidimensional. The theory of multidi-
mensional mechanism design is relatively complex: the main problem is that
incentive compatibility—which in the one-dimensional case often reduces to
a monotonicity constraint—imposes, besides a monotonicity requirement, an
integrability constraint that is not easily included in maximization problems.
Next, we solve the revenue-maximization problem for the case where there
6 Chapter 1

is private information about per-unit values but weights are observable. After
that we derive conditions under which the revenue-maximizing policy for the
case with observable weights is implementable, and thus optimal also for the
case with two-dimensional private information.
We also construct—for general distributions of weights and values—a
time-independent, nonlinear price schedule that is asymptotically revenue-
maximizing when the available capacity and the time to the deadline both
go to infinity. This extends an earlier result for the case of unit demand by
Gallego and van Ryzin, and suggests that complicated dynamic pricing may
not be that important for revenue maximization if the distribution of agents’
types is known. Our result emphasizes though that nonlinear pricing remains
asymptotically important in dynamic settings.

1.4 Chapter 5: Learning and Dynamic Efficiency

Chapter 5 is based on Gershkov and Moldovanu (2009b, 2012, 2013).

Although rather rare in the mechanism design literature, the assumption of
gradual learning about the environment (which replaces here the standard as-
sumption whereby the agents’ values are not known but their distribution is)
seems to us descriptive of most real-life dynamic allocation problems. This
feature is inconsequential in static models, where an efficient allocation is
achieved by the dominant-strategy Vickrey–Clarke–Groves construction, but
it leads to new and interesting phenomena in dynamic settings.
The allocation model studied in this part is again based on the classical
model due to Derman, Lieberman, and Ross (1972). When learning about the
environment takes place, the information revealed by a strategic agent affects
both the current and the option values attached by the designer to various
allocations. Since option values for the future serve as proxies for the values
of allocating resources to other (future) agents, the private values model with
learning indirectly generates informational externalities.
Efficient implementation is possible only if the efficient allocation satis-
fies a monotonicity condition. Intuitively, monotonicity will be satisfied if the
optimism about the future distribution of values associated with higher cur-
rent observation is not too unrealistic. An overly optimistic agent may reveal
information and induce a failure of the truthful revelation—if the designer
decides, in response, to restrict resources in order to keep them for a more
auspious time.
We first derive the direct conditions—that can be checked in applications—
on the exogenous parameters of the allocation-cum-learning environment
Introduction 7

(e.g., conditions on the initial beliefs about the environment and on the learning
protocol) that enable the implementation of the first best. We use a Bayesian
learning model and two adaptive, non-Bayesian learning models.
We next characterize the optimal policy respecting the incentive constraints
(second best). The crucial insight is that the second-best policy is deterministic:
instead of a lottery over several feasible qualities, it allocates to each agent
type, at each point in time, a well-defined available quality.
Our analysis reveals close, formal connections between our dynamic alloca-
tion problems with incomplete information and learning and the classic prob-
lem of obtaining optimal stopping policies for search that are characterized by
a reservation price property. However, our focus on dynamic welfare maxi-
mization differs from the extensive literature on dynamic revenue maximiza-
tion. This literature excludes implementation issues and concentrates instead
on intuitive pricing schemes. But, as we show, learning about the environ-
ment takes place simultaneously with allocation decisions: not all ad hoc pric-
ing schemes will be generally implementable, and any revenue-maximization
scheme must take this fact into account.

1.5 Chapter 6: Long-lived Agents

All models described above have assumed that agents are short lived (while
goods are durable). This implies that physical allocations to agents can be made
only at the point in time when they arrive. Moreover, because arrivals can be
assumed to be observable, a short-lived agent cannot gain by faking (delaying)
her arrival time. Allowing for long-lived, strategic agents adds a new layer of
complexity, and allows us to describe many new and interesting phenomena
that can arise in the different models.
Such distinctions have been neglected by the revenue management prac-
titioners, who have mostly focused instead on short-lived, myopic agents.
The reason seems to be technical: a unifying aspect of models with long-
lived agents is the need to model information via multidimensional vectors
(valuations and arrival times, valuations and departure times and/or deadlines,
information at different points in time, etc.). A recurring difficulty is then to
come up with general, sufficient conditions for optimality.
We first briefly study the polar case where agents are long lived but objects
are short lived, before reviewing several models where both agents and goods
are long lived. The analysis is structured the same as above (first we charac-
terize the complete information policy and then discuss implementation issues
under incomplete information), but here the basic model is search with recall,
whereas the previous models involved search without recall.
8 Chapter 1

One of the earliest and most elegant applications of dynamic mechanism

design was made within the context of queue operations (Dolan 1978). In
these environments randomly arriving, heterogeneous customers are awarded
priorities for using a processing device that can only be used sequentially. We
use such a setting to illustrate direct efficient dynamic mechanisms for queue
management and the role of the curvature of waiting costs in auctions (indirect
mechanisms) for priorities. Deadlines are extreme forms of convex waiting
costs, and we also analyze a model where both valuations for the objects and
deadlines by which the object must be consumed, are private information.
Finally, we consider another very important class of models where the pop-
ulation itself is fixed and static, while the private information available to the
agents evolves dynamically over time. In this class of models we first offer
a relatively general treatement of efficient dynamic implementation based on
dynamic analogues to the Vickrey–Clarke–Groves mechanism. This treatment
is based on the work of Bergemann and Välimäki (2010) and of Athey and
Segal (2013). We close this section with the canonical setting of Courty and
Li (2000) who considered the revenue-maximization problem of a monopo-
list seller facing buyers who gradually learn about their valuations over time.
The monopolist could, in principle, wait until all information arrives, and then
charge the standard monopoly price. But, when early information is related to
later information, it turns out that the seller is able to extract additional revenue
by a gradual screening of buyers.
Table 1.1 summarizes the main properties of the models analyzed in the
various chapters

Table 1.1
Models analyzed in this book
Designer’s Agents Demand Supply
goal
Chapter 2 Efficiency Short-lived, Known process, Heterogeneous
one-unit demand stochastic objects, fixed
Chapter 3 Revenue Short-lived, Known process, Heterogeneous
one-unit demand stochastic objects, optimized
Chapter 4 Revenue Short-lived, Known process, Homogeneous
multi-unit stochastic objects, fixed
demand
Chapter 5 Efficiency Short-lived, Unknown process Heterogeneous
one-unit demand with learning objects, fixed
Chapter 6 Efficiency, Long-lived, Known process, Heterogeneous
revenue unit demand learning, objects, stochastic
stochastic
Notes

1. The more recent literature is surveyed in Bergemann and Said (2011), who differentiate among
models where new agents or new information arrive over time. Of course, there were many
antecedents, such as Dolan (1978), Riley and Zeckhauser (1983), or Wang (1993) on arriving
agents, and Courty and Li (2000) on arriving information.
2. Several papers in the literature consider more general, abstract models where the solution to the
optimization problem is not necessarily available. Thus some of the trade-offs remain implicit.
3. Other differences are the job search model corresponds here to the one object case, and sampling
has an explicit cost.
4. Simpler techniques can be applied to the setting where the horizon is infinite and where there
is time discounting. We do present below the equivalent of our main result for this situation.
5. Our results are easily extended to the setting where arrivals are stochastic and/or time is
continuous.
2 The Sequential Assignment of Heterogeneous Objects

2.1 Introduction

The basic model takes the following form. The designer wants to assign a
fixed, finite set of heterogeneous objects to a sequence of randomly arriving
agents with privately known characteristics. Monetary transfers are feasible.
The objects are substitutes, and each agent derives utility from at most one
object. Moreover all agents share a common ranking over the available objects,
and values for objects have a multiplicative structure involving the agents’
types and objects’ qualities.
We first study the discrete-time, complete information case analyzed by
Derman, Lieberman, and Ross (1972), and then via majorization the re-
lation between the cutoffs appearing in the optimal policy and the order
statistics associated with the distribution of values. In continuous time, the
efficient dynamic allocation under complete information was subsequently
characterized—via a system of differential equations—by Albright (1974).
This policy involves partitioning the set of possible agent types. Then an
arriving agent gets the first-best available object if his type lies in the highest
interval of the partition, the second-best available object if his type lies in the
second highest interval, and so on. The intervals depend on the point in time of
the arrival, and on the composition of the set of available objects at that point
in time.
We next introduce continuous-time models with stochastic arrivals, with
both finite and infinite horizons. The cutoff curves defining the efficient policy
are derived using appropriate differential equations. We show that an increase
in the variability of values or of inter-arrival times leads to an increase in
expected welfare in the dynamic assignment problem. The proof of these
results uses several simple insights from majorization theory. Majorization by
a vector of weighted sums of order statistics plays is also the main way we
12 Chapter 2

assess the welfare loss due to the sequential nature of the allocation process
versus the scenario where the allocation can be delayed until all arrivals and
types have been observed.
We derive associated menus of prices (one menu for each point in time, and
for each subset of remaining objects) that implement the efficient allocation.
We show that these menus have an appealing recursive structure: each agent
who is assigned an object has to pay the value he displaces in terms of the
chosen allocation. Thus we obtain a dynamic version of the Vickrey–Clarke–
Groves (VCG) mechanism.
Nevertheless, it is not enough to focus on the physical allocation in order
to ensure efficiency; one also has to describe what happens to the monetary
payments. In some frameworks these accrue to a third party (e.g., a seller in an
auction) and physical efficiency is thus what matters. In other settings, the
implementation of the efficient physical allocation generates a deficit or a
surplus. If there is no third party, then full efficiency calls for a balanced
budget. It is well known that in the static setup no VCG mechanism can gen-
erally be both individually rational and budget balanced.
For the study of efficient, individually rational and budget-balanced mech-
anisms in our frameworks, we distinguish between two scenarios: (1) both
physical assignments and monetary payments must take place upon the agents’
arrival, and (2) payments can be postponed to later stages.

2.2 Models with Complete Information

We start our analysis with a paradigmatic model due to Derman, Lieberman,

and Ross (1972). In their model several heterogeneous objects, ordered—
in terms of quality, are allocated over time to sequentially arriving agents.
The designer maximizes the expected welfare of agents, which is sum of their
utilities. There is complete information and the only “friction” is due to the
sequentiality: allocating an object today means that it cannot be allocated in
the future, possibly to an agent that values it more.

2.2.1 Discrete-Time Model

We start with the original, discrete-time formulation where one agent arrives
per period, before analyzing the continuous-time version with random arrivals.
We let period n denote the first period, period n − 1 denote the second
period, and period 1 denote the last period. There are n agents who arrive
sequentially, one agent per period. There are m items. Each item i = 1, . . . , m
is characterized by a “quality” qi with 0 ≤ qm ≤ qm−1 ≤ . . . ≤ q1 . Without
The Sequential Assignment of Heterogeneous Objects 13

loss of generality, we can assume that n = m. (If m > n, then only the n items
with highest qualities are relevant for our study; if m < n, then we add n − m
dummy objects with quality q = 0.)
The agents can be served only upon arrival. After an item is assigned, it
cannot be reallocated. Each agent is characterized by a “type” xj , and agents’
types are governed by IID random variables Xi = X on [0, +∞) with a
common cdf, F. We assume that X has a finite mean, denoted by μ, and a
finite variance.
Types are observable to the designer upon the agents’ respective arrival
(thus at each point in time there is uncertainty about the types of agents arriving
in the future). If an item with type qi ≥ 0 is assigned to an agent with type xj ,
this agent enjoys a utility of qi xj . The designer wants to assign the items to
the arriving agents in such a way as to maximize the expectation of the sum of
agents’ utilities.

Theorem 1 (Derman, Lieberman, and Ross 1972) Consider the arrival of

an agent with type xk in period k ≥ 1. There exist k + 1 constants 0 = ak,k ≤
ak−1,k ≤ . . . ≤ a1,k ≤ a0,k = ∞ such that:
1. the dynamically efficient policy assigns the item with quality qi if xk ∈
(ai,k , ai−1,k ], where qi is the ith highest quality among the available
objects in period k;
2. in a problem with n periods the total expected welfare is given by

n
Wn = qi ai,n+1 . (2.1)
i=1

The remarkable part of the preceding result is that the precise values of
the available qualities do not play any role for the allocation policy. It is also
interesting to compare the characterization above to the one in the static case
where all agents arrive at once. In that case we obtain a standard matching
problem, and the efficient assignment among types and objects is assortative,
meaning that the agent with the i-highest type gets the object with the i-highest
quality. Thus the expected welfare in the static case is given by

n
Wns = qi μi,n , (2.2)
i=1

where μi,k denotes the expectation of the ith highest order statistic out of k
copies of X. For the comparison between the dynamic and static case we need
the following definition of vector variability, due to Hardy, Littlewood, and
Pólya (1934):
14 Chapter 2

Definition 1
1. For any vector γ = (γ1 , γ2 , . . . , γk ), let γ(j) , denote the jth largest co-
ordinate so that γ(k) ≤ γ(k−1) ≤ . . . ≤ γ(1) . We say that vector α =
(α1 , α2 , . . . , αn ) is majorized by vector β = (β1 , β2 , . . . , βn ), and we write
α ≺ β if the following system of n − 1 inequalities and one equality is sat-
isfied:
α(1) ≤ β(1) ,
α(1) + α(2) ≤ β(1) + β(2) ,
. . . , α(1) + α(2) + . . . α(n−1) ≤ β(1) + β(2) + β(n−1)
α(1) + α(2) + . . . + α(n) = β(1) + β(2) + . . . + β(n)
2. We say that α is weakly sub-majorized by β and we write α ≺w β if all
relations above hold with weak inequality.
3. Let S ⊆ Rn . A function Ψ : S → R is called Schur-convex on the domain S
if α ≺ β ⇒ Ψ(α) ≤ Ψ(β) for α, β ∈ S.

A well-known characterization of Schur-convexity is the following:

Theorem 2 (Marshall and Olkin 1979) Assume that Ψ : Rn → R is sym-

metric and has continuous partial derivatives. Then Ψ is Schur-convex if and
only if for all (y1 , . . . , yn ) ∈ Rn and all i, j ∈ {1, . . . , n} it holds that
 
∂Ψ (y1 , . . . , yn ) ∂Ψ (y1 , . . . , yn )
− (yi − yj ) ≥ 0.
∂yi ∂yj
We can now state:

Theorem 3 For each n, the vector {ai,n+1 }ni=1 is majorized by the vector
{μi,n }ni=1 .

Proof Assume first that all available qualities are equal, say qi = 1 for
all i. Then sequential arrivals do not impose any loss of welfare. Thus formulas
(2.1) and (2.2) yield the one equality needed in the definition of majorization.
In order to prove that all required inequalities hold, note that expected welfare
in the dynamic case—where assignment “mistakes” occur because of the
sequential arrival—can never be higher than the welfare attained in the static
case. The result follows by applying formulas (2.1) and (2.2) to the n − 1 vector
of qualities of the form (1, 0, . . . , 0), (1, 1, 0, . . ., 0), . . . , (1, 1, 1, . . ., 0).

2.2.2 Continuous-Time Model with Stochastic Arrivals

We assume now that time is continuous, and that agents arrive according to a
(possibly nonhomogeneous) Poisson arrival process with intensity λ(t), and
The Sequential Assignment of Heterogeneous Objects 15

each can only be served upon arrival (i.e., agents are impatient). Here we
count time chronologically; that is the process starts at time 0. For some
results we relax the Poisson assumption, and we allow for a more general
renewal stochastic process to describe arrivals.
If an item of quality qi is assigned to an agent with type xj at time t, then
the utility for the designer is given by r(t)qi xj , where r is a piecewise contin-
uous, nonnegative, nonincreasing discount function that satisfies r(0) = 1. We
denote by q(i:Πt ) the ith highest element of Πt , which is the set of the available
objects at time t. We denote by kt the cardinality of Πt .
Albright (1974) characterized the allocation policy that maximizes the total
expected welfare from the designer’s point of view . His main result is:

Theorem 4 (Albright 1974) There exist m unique functions ym (t) ≤

yn−1 (t) ≤ . . . ≤ y1 (t), ∀t, that do not depend on the q’s such that:
1. if an agent with type x arrives at a time t, it is optimal to assign to that
agent q(j:Πt ) if x ∈ [yj (t), yj−1 (t)), where y0 ≡ ∞, and not to assign any
object if x < ykt (t);
2. for each k, the function yk (t) satisfies
a. limt→∞ r(t)yk (t) = 0;
d[r(t)yk (t)] 
yk−1
b. dt = −λ(t)r(t) (1 − F (x))dx ≤ 0;
yk

3. the
 expected welfare  starting from time t is given by
kt
r(t) i=1 q(i:Πt ) yi (t) .

Again, the interesting element in the preceding result is that the dynamic
welfare-maximizing cutoff curves yj (t) do not depend on the items’ charac-
teristics. Since selling one object is equivalent to exchanging one of the cur-
rently available items with an item having a type equal to zero, the observation
above implies that after any sale at time t, the kt − 1 curves that determine the
optimal allocation from time t on, coincide with the kt − 1 highest curves that
were relevant for the decision at time t.

Deadline Model We assume here that there is a deadline T after which all
objects perish. The discount rate satisfies
1 if 0 ≤ t ≤ T,
r(t) =
0 if t > T.
It is then obvious that the dynamically efficient policy needs to satisfy
y1 (T ) = y2 (T ) = . . . = ym (T ) = 0.
16 Chapter 2

Example 1 Assume that there are three objects, that the arrival process is
homogeneous with rate λ(t) = 1, and that the distribution of agents’ types is
exponential, meaning F (x) = 1 − e−x . By theorem 4, we obtain the follow-
ing system of differential equations that characterize the cutoff curves in the
dynamic welfare-maximizing policy:

y1 =− e−x dx = −e−y1 ,

y1
y1

y2 = − e−x dx = e−y1 − e−y2 ,

y2
y2

y3 = − e−x dx = e−y2 − e−y3 ,

y3

with initial conditions y1 (T ) = y2 (T ) = y3 (T ) = 0. The solution to this sys-

tem is given by

y1 (t) = ln(1 + T − t),

 
(T − t)2
y2 (t) = ln 1 + ,
2(1 + T − t)
 
(T − t)3
y3 (t) = ln 1 + .
3[(T − t)2 + 2(1 + T − t)]

Figure 2.1 depicts the solution for T = 5.

Our main result here shows that an increase in the variability of the distribu-
tion of the agents’ values (while keeping a constant mean) increases expected
welfare. We want to emphasize here that this result holds even if all available
objects are identical! For the proof, which again uses majorization, we first
need a well-known lemma:

Lemma 1 Let α = (α1 , α2 , . . . , αn ) and β = (β1 , β2 , . . . , βn ) be two

n n
n-tuples such that αi = i=1 βi . Then α ≺ β if and only if
n n i=1
i=1 qi α(i) ≤ i=1 qi β(i) for any constants qn ≤ qn−1 ≤ . . . ≤ q1 .
n n
Proof Assume that i=1 qi α(i) ≤ i=1 qi β(i) for any qn ≤ qn−1 ≤ . . . ≤
q1 . For each k = 1, 2, . . . , n − 1 consider q k = (q1k , q2k , . . . , qnk ), where qik = 1
for i = 1, 2, . . . k, and qik = 0 for i = k + 1, k + 2, . . . , n. Then for each k
The Sequential Assignment of Heterogeneous Objects 17

2.0

1.5

1.0

0.5

0.0
0 1 2 3 4 5
t
Figure 2.1
y1 solid line; y2 dashed line; y3 dotted line

we obtain

n 
n 
k 
k
qik α(i) ≤ qik β(i) ⇔ α(i) ≤ β(i) ,
i=1 i=1 i=1 i=1

and thus α ≺ β.
Assume α ≺ β, and let qn ≤ qn−1 ≤ . . . ≤ q1 . Then we have the following
chain:

n 
n 
n−1
qi [β(i) − α(i) ] = qn [β(i) − α(i) ] + (qi − qn )[β(i) − α(i) ]
i=1 i=1 i=1
n 
n−1
= qn [β(i) − α(i) ] + (qn−1 − qn ) [β(i) − α(i) ]
i=1 i=1

n−2
+ (qi − qn−1 )[β(i) − α(i) ]
i=1
..
.

n 
n−1 
j
= qn [β(i) − α(i) ] + (qj − qj+1 )( [β(i) − α(i) ])
i=1 j=1 i=1

≥ 0.
n n
n
The last inequality follows since (1) i=1 [β(i) − α(i) ] = i=1 βi −
α
i=1 i = 0 by definition, (2) ∀j, qj − q j−1 ≥ 0 by definition, and
j
(3) ∀j, i=1 [β(i) − α(i) ] ≥ 0 by majorization.
18 Chapter 2

Theorem 5 Consider two distributions of agents’ types F and G such that

μF = μG = μ and such that F second-order stochastically dominates G (in
particular F has a lower variance than G). Then it holds that:
k k
i=1 yi (t) ≤ i=1 yi (t), ∀k, t;
F G
1.
2. for any time t and for any set of available objects at t, Πt = ∅, the expected
welfare in the efficient dynamic allocation under F is lower than that
under G.

Proof (1) By theorem 4, we know that

k ∞
d( i=1 yiF (t))
= −λ(t) (1 − F (x))dx,
dt
F (t)
yk

k ∞
d( i=1 yiG (t))
= −λ(t) (1 − G(x))dx.
dt
G (t)
yk

∞ ∞
Define first HF (s) = (1 − F (x))dx and HG (s) = (1 − G(x))dx.
s s
These are both positive, decreasing functions with HF (0) = HG (0) = μ. By
SSD, for any s ≥ 0 it holds that
s s s s

F (x)dx ≤ G(x)dx ⇔ (1 − F (x))) dx ≥ (1 − G(x))) dx

0 0 0 0

∞ ∞

⇔ (1 − F (x))dx ≤ (1 − G(x))dx ⇔ HF (s) ≤ HG (s),

s s

where the second line follows because

∞ ∞

(1 − F (x))dx = μF = μG = (1 − G(x))dx.
0 0

Thus the curve HF is always below HG .Consider now y1F (t) and y1G (t). These
are, respectively, the solutions to the differential equations

y  = −λ(t)HF (y) and y  = −λ(t)HG (y)

The Sequential Assignment of Heterogeneous Objects 19

with boundary condition y(T ) = 0. Integrating these equations from t to T ,

and using the boundary condition, we get the integral equations
T T

y(T ) − y(t) = − λ(s)HF (y(s))ds ⇔ y(t) = λ(s)HF (y(s))ds and

t t
T T

y(T ) − y(t) = − λ(s)HG (y(s))ds ⇔ y(t) = λ(s)HG (y(s))ds.

t t

Because HF is always below HG and because these are decreasing functions,

we obtain y1F (t) ≤ y1G (t).
Consider now y1F (t) + y2F (t) and y1G (t) + y2G (t). These functions satisfy
the differential equations
∞ ∞
 
y = −λ(t) (1 − F (x))dx and y = −λ(t) (1 − F (x))dx
y−y1F (t) y−y1G (t)

with boundary condition y(T ) = 0. Integrating from t to T yields the equations

⎡ ⎤
T ∞ T
⎢ ⎥
y(t) = λ(s)⎣ (1 − F (x))dx⎦ds = λ(s)HF [(y(s) − y1F (s)] ds,
t y(s)−y1F (s) t
⎡ ⎤
T ∞ T
⎢ ⎥
y(t) = λ(s)⎣ (1 − G(x))dx⎦ ds = λ(s)HG [(y(s) − y1G (s)] ds.
t y(s)−y1G (s) t

We have

HF [(y(t) − y1F (t)] ≤ HF [(y(t) − y1G (t)] ≤ HG [(y(t) − y1G (t)], ∀t,

where the first inequality follows because y1F (t) ≤ y1G (t) ⇔ y(t) − y1F (t) ≥
y(t) − y1G (t) and because the function HF is decreasing, and the second
inequality follows because HF is always below HG . This yields y1F (t) +
y2F (t) ≤ y1G (t) + y2G (t), as required. The rest of the proof follows analogously.
(2) The expected welfare terms at time t if there are |Πt | = k are
 
given by ki=1 q(i:Πt ) yiF (t) and by ki=1 q(i:Πt ) yiG (t), respectively. By point
1, we know that for each k and for each time t, y kF (t) = (y1F (t), y2F (t), . . . ,
ykF (t)) ≺w (y1G (t), y2G (t), . . . , ykG (t)) := y kG (t). By result (12.5 b) in Pecaric,
Proschan, and Tong (1992), for each k and each t there exists a k-vector z(t)
20 Chapter 2

such that z(t) ≺ y kG (t) and such that zi (t) ≥ yiF , ∀i. We obtain then


k 
k 
k
q(i:Πt ) yiF (t) ≤ q(i:Πt ) zi (t) ≤ q(i:Πt ) yiG (t), ∀k, t,
i=1 i=1 i=1

n
where the last inequality follows since α ≺ β if and only if i=1 qi α(i) ≤
n
i=1 qi β (i) for any constants q n ≤ qn−1 ≤ . . . ≤ q1 by lemma 1.
A main application of theorem 5 follows. For a constant arrival rate, the sys-
tem of differential equations that characterizes the efficient dynamic allocation
can be solved explicitly for any number of objects if the distribution of the
agents’ types is exponential (see the example above), while this is rarely the
case for other distributions. Together with the preceding result, that solution
can be used to bound the optimal policy and the associated welfare for large,
nonparametric classes of distributions. We first need the following definition:

Definition 2 A nonnegative random variable X is said to be new better than

used in expectation (NBUE, new worse than used in expectation, NWUE) if

E[X − a | X > a] ≤ (≥) E[X], ∀a ≥ 0.

A nonnegative random variable X is said to have an increasing failure rate

f (a)
(IFR; decreasing failure rate, DFR) if the function 1−F (a) is increasing (de-
creasing), where F is the cumulative distribution function governing X, and
where f is the associated density.

The concepts comes from reliability theory where X represents the stochas-
tic lifetime of a certain component. The term E[X − a | X > a] is the expect-
ed remaining lifetime given that the component has functioned for a given
f (a)
period a. The failure rate 1−F (a) is the instantaneous probability that the com-
ponent fails at time a given that it has functioned so far. The classes of
NBUE (NWUE) distributions are large and contain many of the distributions
that appear in applications. Any distribution with an increasing failure (or
hazard) rate is NBUE, while any distribution with a decreasing failure rate
is NWUE. The exponential distribution belongs to the intersection of all these
classes.

Corollary 1 Let F, the distribution of agents’ types, be NBUE (NWUE) with

mean μ. Then, for any t and Πt = ∅, the expected welfare in the efficient
dynamic allocation under F is lower (higher) than that under the exponen-
x
tial distribution G(x) = 1 − e− μ .
The Sequential Assignment of Heterogeneous Objects 21

Proof The result follows directly from theorem 5 by noting that F

second-order stochastically dominates G(x) = 1 − e−x/μ (is second-order
stochastically dominated by G(x) = 1 − e−x/μ ) if and only if F is NBUE
(NWUE). This is theorem 8.6.1 in Ross (1983). In other words,
∞

∀y ≥ 0, (1 − F (x))dx ≤ (≥)μe−x/μ if F is NBUE (NWUE).

y

Example 2 Let F (x) = x on [0, 1] so that F is IFR, and thus NBUE, and let
λ(t) = 1. Assume that there is one object with type p1 = 1. The optimal cutoff
curve satisfies
1
1 y2
yF =− (1 − x)dx = − + yF − F
2 2
yF

with initial condition yF (T ) = 0. The solution to this differential equation is

2
yF (t) = 1 − .
T −t+2
2
Figure 2.2 illustrates the corollary for T = 5: yF (t) = 1 − 7−t is the dashed
1
line, yG (t) = 2 ln[6 − t] is the solid line corresponding to the exponential dis-
tribution G(x) = 1 − e−2x with mean 12 .

Loss due to Sequentiality Suppose that at time t there are m objects

left, with qualities q1 ≥ q2 ≥ . . . ≥ qm . Instead of the original formulation,

1.2
y
1.0

0.8

0.6

0.4

0.2

0.0
0 1 2 3 4 5 6
t

Figure 2.2
2 1
yF (t) = 1 − 7−t
dashed line; yG (t) = 2
ln[6 − t] solid line
22 Chapter 2

consider now the scenario where the allocation decision to all subsequently
arriving agents can be made at time T (the deadline) where their precise
number and types are known. At time T a welfare-maximizing designer will
allocate the object with the highest quality to the agent with the highest type,
the object with the second highest quality to the agent with the second highest
type, and so on (assortative matching). This means that the expected welfare at
m
time t is given by i=1 qi zi (t), where zi (t) represents the expected type of an
agent that arrives after t and that get assigned to the object with the ith high-
est quality. In order to calculate the zi (t) terms, let X(i,l) denote the ith-order
statistic out of l copies of X, and denote by μi,l its expectation (note that μl.l
is the expectation of the maximum or highest order statistic).
We assume here for simplicity that arrivals follow a homogeneous Poisson
process with rate λ. The argument is easily extended to non-homogeneous
processes.
l l
Let Prl (t) = e−λ(T −t) λ (Tl!−t) be the probability that there will be l
arrivals, l ≥ 1, after time t. Given assortative matching at time T, we obtain1
∞

zi (t) = Prl (t)μl−i+1,l
l=i
∞
 λl (T − t)l μl−i+1,l
= e−λ(T −t) , i = 1, 2, . . . , m.
l!
l=i

Our next result establishes a relation between the m-vector of optimal

dynamic cutoffs {yi (t)}mi=1 and the m-vector of the corresponding static
expected types {zi (t)}m
i=1 . Intuitively,

m
qi [yi (t) − zi (t)]
i=1

measures the welfare loss due to the sequentiality constraint.

Theorem 6 For any period t, and for any n, the vector {yi (t)}m i=1 of op-
timal cutoffs in the welfare-maximizing sequential allocation of m objects to
agents arriving according to a Poisson process with parameter λ is weakly
m
sub-majorized by the vector {zi (t)}m i=1 . Moreover limm→∞ i=1 yi (t) =
m
limm→∞ i=1 zi (t) = λ(T − t)μ, where μ is the mean of the distribution of
agents’ types.

Proof Consider a situation with k ≤ m identical objects available at time t.

For any particular realization of arrivals and agents’ types from period t on,
welfare in the case where the decision can be delayed until the entire real-
k
ization has been observed is given by i=1 zi (t). Consider now the original
The Sequential Assignment of Heterogeneous Objects 23

sequential assignment problem where agents arrive according to a Poisson pro-

cess, and allocations must be made upon arrival. By theorem 4, the expected
k
total welfare is then given by i=1 yi (t). For any realization of arrivals and
types, this total welfare cannot be larger than that obtained in the previous
scenario where allocations can be delayed since mistakes may have occurred
due to the constraints of sequentiality, meaning an agent with a lower type was
served although there was another arrival with a higher type. In other words,
any allocation obtained in the sequential process can be replicated when de-
k k
layed allocations are possible. This yields i=1 yi (t) ≤ i=1 zi (t), ∀k ≤ m,
as required.
The second part follows by considering the limit when the number of iden-
tical objects tends to infinity. In that limit, all arriving agents should be served,
and there is no welfare loss due to the sequentiality constraint. By theorem 4,
we know that
m ∞
d[ i=1 yi (s)]
= −λ (1 − F (x))dx.
ds
ym (s)

Integrating the expression above between t and T and recalling that

m
i=1 yi (T ) = 0 yields
⎛ ⎞
T ∞

m
⎜ ⎟
yi (t) = λ ⎝ (1 − F (x))dx⎠ds.
i=1 t ym (s)

Taking the limit with respect to m, we finally obtain

⎛ ⎞
T ∞

m
⎜ ⎟
lim yi (t) = lim λ ⎝ (1 − F (x))dx⎠ds
m→∞ m→∞
i=1 t ym (s)
T
⎛ ∞
⎞

=λ ⎝ (1 − F (x))dx⎠ ds = λ(T − t)μ,

t 0

where the second line follows since limm→∞ ym (t) = 0 uniformly.

If the number of homogeneous objects m is large, sequentiality does not
cause any welfare loss, since any arriving agent should get an object. The limit
expression is intuitive: for each arrival, expected welfare is given by the aver-
age type μ, and λ(T − t) is the expected number of arrivals.
24 Chapter 2

Finally, we note here that theorem 5 has an analogous counterpart for the
static cutoffs zi (t). The proof uses then a recent result about majorization of
mean order statistics due to De La Cal and Caracamo (2006).

Infinite Horizon Model Let us assume that the time horizon is potentially
infinite and that r(t) = e−αt . Given this “memoryless” specification, the
arrival process can be more general, and it is assumed here to be a renewal
process with a general inter-arrival distribution B.This is a generalization
of the Poisson process where the inter-arrival distribution is assumed to be
exponential.2 We start with a simple example that illustrates the main insight:
the stationarity of the welfare-maximizing dynamic policy. We first need the
following definition:

Definition 3 Let t ≥ 0. The Laplace transform of a function g(t) is

defined by
∞

G(s) = e−st g(t)dt.

0

Example 3 Let the arrival process be Poisson with rate λ, that is, B(t) =
 denote the Laplace transform of the inter-arrival distri-
1 − e−λt , and let B
bution B. Note that
∞
 λ
B(α) = e−αt λe−λt dt =
α+λ
0

and that

B(α) λ
= .

1 − B(α) α

The Laplace transform B(α) acts here as the effective discount rate. It repre-
sents the discounted value of one unit at the expected time of the next arrival.
Consider now the the differential equation (see theorem 4) defining the efficient
allocation curve for the case of one object y1 (t):
∞
d[r(t)y1 (t)]
= −λr(t) (1 − F (x))dx.
dt
y1
−αt
Plugging r(t) = e , we get
∞

(y1 − αy1 ) = −λ (1 − F (x))dx.

y1
The Sequential Assignment of Heterogeneous Objects 25

Assuming now that y1 = 0 yields

∞ ∞
λ 
B(α)
y1 = (1 − F (x))dx = (1 − F (x))dx.
α 
1 − B(α)
y1 y1

On [0, τ ], the interval of definition of the distribution of types F the identity

function on the left-hand side, y1 , increases from 0 to τ while the function
∞
α
λ
(1 − F (x))dx decreases in y1 from αλ μ (where μ is the mean of F ) to 0.
y1
Thus there is a unique intersection point, and the equation above has a unique
solution y1∗ . Since limt→∞ e−αt y1∗ = 0, we obtain that the efficient dynamic
cutoff curve is indeed described by the constant y1∗ . The derivations for more
items follow analogously.

More generally, the complete-information efficient dynamic assignment

turns out to be stationary, and it is characterized in the following
theorem:

Theorem 7 (Albright 1974) Assume that r(t) = e−αt . The efficient allo-
cation curves are constants (i.e., independent of time) ym ≤ yn−1 ≤ . . . ≤ y1 .
These constants do not depend on the q’s, and are given by the implicit
recursion:

∞

B(α)
(yk + yk−1 + . . . + y1 ) = (1 − F (x))dx, 1 ≤ k ≤ m,

1 − B(α)
yk

 is the Laplace- transform of the inter-arrival distribution B.

where B

The analogue of theorem 5 for this case is:

Theorem 8 Consider two distributions of agents’ types F and G such that

μF = μG = μ and such that F second-order stochastically dominates G (in
particular F has a lower variance than G). Then, for any fixed inter-arrival
distribution B, it holds that:
k k
i=1 yi ≤ i=1 yi , ∀k;
F G
1.
2. for any t and any Πt = ∅ the expected welfare in the efficient dynamic
allocation under F is lower than that under G.
26 Chapter 2


B(α) ∞
Proof (1) Define first HF (s) = 
1−B(α)
(1 − F (x))dx and HG (s) =
s

B(α) ∞

1−B(α)
(1 − G(x))dx. These are both decreasing functions and
s


B(α)
HF (0) = HG (0) = μ.

1 − B(α)
Consider now y1F and y1G . These are, respectively, the solutions to the
equations:

s = HF (s) and s = HG (s)

By SSD, for any s ≥ 0 it holds that

s s s s

F (x))dx ≤ G(x))dx ⇔ (1 − F (x))) dx ≥ (1 − G(x))) dx

0 0 0 0
∞ ∞

⇔ (1 − F (x))dx ≤ (1 − G(x))dx ⇔ HF (s) ≤ HG (s)

s s

Thus the decreasing curve HF (s) is always below the decreasing curve HG (s),
so we obtain yF1 ≤ yG1
. Consider now y2F and y2G , which are defined by the
equations
∞

B(α)
y2F + y1F = (1 − F (x))dx,

1 − B(α)
y2F
∞

B(α)
y2G + y1G = (1 − G(x))dx.

1 − B(α)
y2G

Equivalently, y2F + y2F and y2G +y1G are, respectively, the solutions of

s = HF (s − y1F ) and s = HG (s − y1G ).

Recalling that y1F ≤ y1G , we obtain s − y1F ≥ s − y1G , ∀s. This yields

HF (s − y1F ) ≤ HF (s − y1G ) ≤ HG (s − y1G ),

where the first inequality follows because the function HF is decreasing, and
the second inequality follows by SSD. Thus the curve HF (s − y1G ) is always
below the curve HG (s − y1G ) and the result follows as above. The rest of the
proof is completely analogous.
The Sequential Assignment of Heterogeneous Objects 27

(2) The
expected welfare
 terms from
time t on if k objects left are given
−αt k F −αt k G
by e i=1 q(i) yi and by e i=1 q(i) yi , respectively. The proof
proceeds exactly as that of theorem 5, condition 2.

In addition to theorem 8 on the benefits of increased variability in the

agents’ types, we now obtain a comparative-statics result about the benefits
of variability in arrival times. Interestingly, this next result holds for a stochas-
tic order that is much weaker than second-order stochastic dominance.

Definition 4 (Shaked and Shanthikumar 2007) Let X, Y be two nonnega-

tive random variables. X is said to be smaller than Y in the Laplace transform
order, denoted by X ≤Lt Y, if
E[e−sX ] ≥ E[e−sY ] for all s > 0.

Theorem 9 Consider two inter-arrival distributions B and E such that

B ≥Lt E. Then, for any fixed distribution of agents’ characteristics F, it holds
that
k k
i=1 yi ≤ i=1 yi , ∀k;
B E
1.
2. for any t and for any Πt = ∅, the expected welfare in the efficient dynamic
allocation under B is lower than that under E.

Proof (1) Let

∞

B(α)
HB (s) = (1 − F (x))dx,

1 − B(α)
s
∞

E(α)
HE (s) = (1 − F (x))dx,

1 − E(α)
s

where B and E  are the respective Laplace transforms. By the definition of

the Laplace transform, and by the assumption that B ≥Lt E, we know that

B(α) 
≤ E(α). This yields

B(α) 
E(α)

B(α) 
≤ E(α) ⇔ ≤ ⇔ HB (s) ≤ HE (s).

1 − B(α) 
1 − E(α)
The first equivalence follows because the function x/(1 − x) is increasing on
the interval [0, 1) with limx→1 x/(1 − x) = ∞ , and because Laplace trans-
forms take values in the interval [0, 1].
Thus we have learned that the decreasing function HB (s) is always
below the decreasing function HE (s). Consider first y1B and y1E . These are,
28 Chapter 2

respectively, the solutions to the equations s = HB (s) and s = HE (s). The

rest of the proof continues analogously to the proof of theorem 5.
Again, we can apply the comparative-static results above in order to bound
the optimal cutoff curves and the associated expected welfare for large classes
of distributions of the agents’ types and of the inter-arrival times.

Corollary 2 For any t and for any Πt = ∅ we have the following welfare
comparisons:
1. for any fixed distribution of inter-arrival times, the expected welfare un-
der an NBUE(NWUE) distribution of agents’ types with mean μ is lower
(higher) than the expected welfare under the exponential distribution
G(t) = 1 − e−t/μ ;
2. for any fixed distribution of agents’ types, the expected welfare under an
NBUE(NWUE) distribution of inter-arrival times with mean μ is lower
(higher) than the expected welfare under a Poisson arrival process with
rate 1/μ.

Proof The first claims follows from theorems 8, from the fact that NBUE
(NWUE) distributions second-order stochastically dominate (are dominated
by) an exponential distribution with the same mean (see also the proof of corol-
lary 1). The second claim follows from theorem 9, from the observation above,
and from the fact that second-order stochastic dominance implies domination
in the Laplace transform order.

Example 4 Assume that there is one object with q1 = 1, and consider a sit-
uation with an NBUE(NWUE) distribution of agents’ types with mean μ, and
another NBUE(NWUE) distribution of inter-arrival times with mean ω. Let
the discount rate be α. Then the expected welfare under the efficient sequential
allocation policy is lower (higher) than

1
μLambertW ,
ωα

where the increasing function LambertW(x) is implicitly defined by

LambertW(x)eLambertW(x) = x.

To show this, consider the exponential distributions Gμ = 1 − e−t/μ for

the agents’ types and Gω = 1 − e−t/ω for the inter-arrival times. For these
The Sequential Assignment of Heterogeneous Objects 29

y
1.0

0.8

0.6

0.4

0.2

0.0
0 1 2 3 4 5
w
Figure 2.3
Solution as a function of ω for μ = α = 1

distributions, the optimal cutoff point y1 solves

∞
ω (α)
G
y1 = e−t/μ dt = μ/ωαe−y1 /μ .
1−G ω (α)
y1

The solution to this equation is given by

 
1
y1 = μLambertW ,
ωα
and the result follows by corollary 2. Note that the solution is linear in μ, the
mean of the agents’ distribution of types. Figure 2.3 plots the solution as a
function of ω for μ = α = 1 (note that ω, the mean inter-arrival time, and α,
the discount factor, play here analogous roles).

2.3 Incomplete–Information Model and the Dynamic

Vickrey–Clarke–Groves Mechanism

2.3.1 Private Information

We consider the basic dynamic allocation model outlined above, but we

now assume that the arriving agents’ types are private information. Thus the
designer does not observe types.
The main question here is whether the designer is able to implement the
dynamic efficient policy characterized in theorem 4. We answer this question in
the affirmative by allowing monetary transfers, and by constructing a dynamic
30 Chapter 2

analogue of the celebrated Vickrey–Clarke–Groves (VCG) mechanism. With

monetary transfers, we assume that the utility functions are quasi-linear: that
is, an agent with type x who obtains an item with quality q at price p has a
utility of (qx − p), and an agent that makes a payment p without receiving an
object has a utility of (−p).
We focus here on the continuous-time case with a deadline. The analysis
for the other cases is completely analogous.
Without loss of generality, we restrict attention to direct mechanisms where
every agent, upon arrival, reports his characteristic xi and where the mecha-
nism specifies an allocation (which item, if any, the agent gets) and a payment.
The schemes we develop also have an obvious and immediate interpretation as
indirect mechanisms, where the designer sets a time-dependent menu of prices,
one for each item, and where arriving agents choose an item out that menu.
An allocation policy is called deterministic and Markovian if, at any time t,
and for any possible type of agent arriving at t, it uses a nonrandom allocation
rule that only depends on the arrival time t, on the declared type of the arriving
agent, and on the set of items available at t, denoted by Πt . Thus the policy
depends on past decisions only via the state variable Πt . We also restrict atten-
tion to interim-individually rational policies, where no agent ever pays more
than the utility obtained from the physical allocation.
Denote by Qt : [0, +∞) × 2Π0 → Π0 ∪ ∅ a deterministic Markovian allo-
cation policy for time t with an additional requirement that for any A ∈ 2Π0
and x ∈ [0, +∞), Qt (x, A) ∈ A ∪ ∅. That is for any set of the available
objects, the allocation policy will assign either one of the available objects
or no object at all. Denote by Pt : [0, +∞) × 2Π0 → R the associated payment
rule. Recall that we denote by kt the cardinality of set Πt and by q(j:Πt ) the
jth highest element of the set Πt .
The next proposition shows that a deterministic, Markovian allocation pol-
icy is implementable if and only if it is based on a partition of the agents’
type space.3 In other words, implementability reduces here to setting a menu
of prices, one for which object, from which the arriving agent has to choose.

Proposition 1 Assume that Πt is the set of objects available at time t, and

assume that qj = qk for any qj , qk ∈ Πt , j = k.
1. A deterministic, Markovian policy Qt is implementable if and only if there
exist kt + 1 functions

∞ = y0,Πt (t) ≥ y1,Πt (t) ≥ y2,Πt (t) ≥ · · · ≥ ykt ,Πt (t) ≥ 0,

such that x ∈ [yj,Πt (t) , yj−1,Πt (t)) ⇒ Qt (x, Πt ) = q(j:Πt ) and x <
ykt ,Πt (t) ⇒ Qt (x, Πt ) = ∅.4
The Sequential Assignment of Heterogeneous Objects 31

2. In the associated payment scheme, an agent with type x that arrives at

time t obtains an amount S(t) where S(t) is some allocation- and type-
independent function. In addition, if x ∈ [yj,Πt (t) , yj−1,Πt (t)), then the
agent pays for the object with the j-highest quality (among the remaining
objects) a price given by

kt
Ptj (x, Πt ) = (q(i:Πt ) − q(i+1:Πt ) )yi,Πt (t),
i=j

where ∀t, q(kt +1:Πt ) = 0.5

Proof (1) If two reports of the agent that arrives at t lead to the same phys-
ical allocation, then, in any incentive compatible mechanism, the associated
payments should be the same as well. With some abuse of notation, denote by
P j the payment that will be charged for the object with the j-highest quality
qj . A direct mechanism is equivalent to a mechanism where the agent arriv-
 kt
ing at time t chooses an object and a payment from a menu qj , P j j=1 . If
some type x prefers the pair (qk , P k ) over any other pair (ql , P l ) with qk > ql ,
then any type x  > x also prefers (qk , P k ) over (ql , P l ). This implies that
Qt (x, Πt ) ≥ Qt (x, Πt ) for any t and Πt . Finally, noting that Qt (x, Πt ) = ∅
is equivalent to allocating an object with quality equal to zero, implies that
an agent who arrives at time t gets object q(k) if he reports a type con-
tained in the interval (yk,Πt (t) , yk−1,Π  t (t)). A similar argument shows that
Qt (yi,Πt (t) , Πt ) ∈ q(i+1:Πt ) , q(i:Πt ) for i ∈ {1, 2, . . . , kt }.
(2) The proof is constructive: given a partition-based policy, we de-
sign a payment scheme that, for any j ∈ {1, . . . , kt }, induces type x ∈
[yj,Πt (t) , yj−1,Πt (t)) to choose the object with type q(j:Πt ) . Without loss of
generality, we assume that an agent whose type is on the boundary between
two intervals in the partition chooses the item with higher type. Consider then
the following payment scheme where an agent who arrives at t obtains S(t),
and in addition pays


kt
Ptj (x, Πt ) = (q(i:Πt ) − q(i+1:Πt ) )yi,Πt (t) if x ∈ [yj,Πt (t) , yj−1,Πt (t)),
i=j
(2.3)
that is, if he is allocated the object with the j-highest quality among the remain-
ing ones. Note that S(t) does not affect incentives.
  Note alsoj+1  type x =
that
yj,Πt (t) is indifferent between q(j:Π  t ) , P j
and
 q(j+1:Π
 t ) , P . Moreover

any type above yj,Πt (t)prefers q(j:Πt ) ,P j over  q(j+1:Πt ) , P j+1
, while
any type below prefers q(j+1:Πt ) , P j+1 over q(j:Πt ) , P j . Therefore any
32 Chapter 2

 
type x ∈ [yj,Πt (t) , yj−1,Πt (t)) prefers q(j:Πt ) , P j over any other pairs in
the menu.
It is important to note that, although the cutoff curves determining an
implementable allocation are independent of the objects’s qualities, the prices
that implement this allocation do depend on the exact values of these quali-
ties. This insight will be heavily used in the next chapter where we study the
revenue maximizing allocation and the associated prices: it is much easier to
maximize over the quality-independent implementable allocations rather than
directly over prices.
For our present purpose of dynamic efficient implementation, the desired
allocation rule is clear: the agent who arrives at time t gets the object with the
i’th highest characteristic if and only if he reports a type x ∈ [yi (t), yi−1 (t)),
where the cutoff yi (t) is given by theorem 4. Since this allocation has the
partition form described in the result above, we obtain:

Corollary 3 The complete information dynamically efficient allocation

policy is implementable also under incomplete information by the following
payment scheme: any agent that arrives at time t obtains an amount S(t). In
addition the price at period t for the object with the jth highest quality (among
the remaining objects) is given by


kt
Ptj (Πt ) = (q(i:Πt ) − q(i+1:Πt ) )yi,Πt (t), (2.4)
i=j

where the cutoff functions {yi,Πt (t)}i,t are given in theorem 4 and where ∀t,
q(kt +1:Πt ) = 0. This mechanism is individually rational if S(t) ≥ 0.

Proof It only remains to prove that the mechanism is individually rational

when S(t) ≥ 0.To see this, note first that an agent with type x that arrives
at time t has in any case utility of S(t) ≥ 0. In addition, if he purchases the
object with the j-highest characteristic among the remaining ones, he obtains
an additional utility of


kt
xq(j:Πt ) − (q(i:Πt ) − q(i+1:Πt ) )yi,Πt (t)
i=j


kt
= q(j:Πt ) (x − yj,Πt (t)) − q(i:Πt ) (yi+1,Πt (t) − yi,Πt (t)) ≥ 0.
i=j+1
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une imposante ampleur. La sebenia de soie, remplaçant la simple cotonnade
blanche permise aux vierges, laisse tomber de longues franges multicolores
autour de ses joues peintes. Des anneaux d’or, enrichis d’énormes rubis, se
balancent à ses petites oreilles brunes qu’ils déforment, et la ferronnière, qui
brille au milieu de son front, est constellée de diamants, étincelants à faire
jaunir d’envie toutes les sultanes.
Je ne l’ai point questionnée sur Mouley Hassan, et la petite épouse ne
m’en a rien dit, mais il semble présent partout en cette demeure. Son nom
est dans toutes les bouches, son selham, bien plié, reposait sur un matelas,
et le nerf de bœuf, dont il use volontiers avec les esclaves, pendait à la
muraille, à côté d’un chapelet et d’un poignard au fourreau d’argent.
Après les premiers compliments et les nouvelles de mon voyage, Lella
Oum Keltoum m’entretint, très longuement, de terrains contestés que le
Chérif veut acheter... Histoire étrange et bien compliquée pour une petite
Musulmane... Cependant cela semble la passionner tout autant que les
présents dont son époux la comble, les caftans d’une invraisemblable
somptuosité qui emplissent tous ses coffres et les bijoux trop modernes,
massifs et surchargés d’insolentes pierreries, qu’elle me fit évaluer avec
orgueil.
Lella Oum Keltoum a pris l’assurance tranquille d’une maîtresse des
choses. Les négresses exécutent ses ordres avec empressement. Elles ne
traînent plus, négligentes, à travers la demeure, et se tiennent debout,
adossées aux portes, humbles et prêtes à servir, ou vaquent dans les cuisines
à leurs besognes coutumières.
Elles s’apparentent déjà, par leurs airs repus, aux vigoureuses esclaves
du Chérif; leurs faces camuses et sournoises se sont épanouies; des foutas
neuves ceignent leurs fortes croupes.
Marzaka elle-même a repris tout naturellement la place qui convient.
Lella Oum Keltoum la traite avec mansuétude et l’entente semble les unir
parfaitement, sans aucune rancœur des querelles passées.
Opulente et nette en son caftan de drap géranium que tempère une tfina
de mousseline blanche, la grosse négresse a renoncé aux brocarts fripés
qu’elle arborait jadis, hors de propos. Elle se tient, selon la bienséance, un
peu à l’écart sur le sofa, tandis que Lella Oum Keltoum siège avec moi au
milieu du divan, place honorable d’où l’on aperçoit le patio.
 Toujours mielleuse, prompte à l’adulation, Marzaka traite sa fille avec
une flatteuse déférence.
Bénédiction[82]! ô Lella! répond-elle à ses moindres propos.
Devant nous, le soleil étincelle aux marbres luisants de la cour, à ses ors,
à ses mosaïques, à ses eaux ruisselant des vasques.
Et les reflets ardents éclairent d’heureux visages apaisés, dans l’ombre
de la salle...
Ce n’est plus qu’abondance, plénitude, jouissance de l’être et
satisfaction.
Alors, ce que je voulais dire, je ne l’ai point dit, et n’ai point demandé ce
que je voulais demander.
Mais, en quittant Lella Oum Keltoum, je me suis écriée:
—En vérité! la bénédiction d’Allah s’étend sur ta maison!
—Louange à Dieu! répondit-elle avec conviction. Puisse-t-Il nous garder
la félicité qu’Il accorda!

17 juin.
Un nègre, portant sur sa tête un grand plateau de bois coiffé d’un cône en
vannerie, est introduit dans notre riadh. Les petites filles, toujours curieuses,
m’appellent avec insistance. Elles ont hâte de soulever le pittoresque
couvercle et de réjouir leurs yeux par l’aspect des friandises dont se
délecteront leurs palais.
Mes amies musulmanes m’ont habituée à ces cadeaux culinaires,
accompagnés de souhaits, de salutations et souvent d’une pressante invite à
les aller voir.
J’ai reconnu El Bachir, l’esclave de Lella Lbatoul. Il me remet un
mouchoir plein de pétales de roses, et découvre le plateau afin que je
contemple les fenouils confits dans du vinaigre et les délectables beignets
au miel parsemés de sésame. Je m’apprête à le charger, pour sa maîtresse,
des remerciements qui conviennent, mais son compliment, plus long que de
coutume et d’une étrange teneur, m’arrête, interdite.
—Lella Lbatoul t’envoie son salut le plus tendre et le plus parfumé. Elle
espère qu’il n’y a pour toi que prospérité et te fait savoir qu’elle
s’ensauvage de ton absence depuis le long temps qu’elle ne t’a vue. En
sorte qu’elle désire ardemment que tu viennes la distraire. Elle t’apprend
aussi que sa petite fille, la chérie, Lella Aïcha, est entrée ce matin dans la
miséricorde d’Allah, par suite de sa maladie, la rougeole, et que tous les
autres enfants en sont atteints. Puisse le Seigneur les guérir!... Lella Lbatoul
fit cueillir ces roses de ses rosiers et sortir des réserves ce fenouil et ces
gâteaux que tu aimes, afin que ton odorat, ton goût et ton cœur soient
excellemment dulcifiés... Et la petite Aïcha—qu’Allah miséricordieux la
reçoive et l’agrée!—fut enterrée à midi... Sur le hakem et sur toi, paix et
bénédictions parfaites!...
Voilà ce que m’a dit l’esclave en m’offrant les fleurs, les hors-d’œuvre et
les pâtisseries.
Je ne suis pas étonnée, car je sais qu’il ne faut pas s’étonner des choses
que l’on ne comprend point, ni surtout les juger.
Mais j’ai revu, dans ma pensée, la fillette accrochée aux caftans
maternels et que Lella Lbatoul couvrait de baisers passionnés.
La petite Aïcha est morte!... C’était écrit! Il ne reste plus que la
résignation... Et, comme il ne sied point d’attrister une amie par une
nouvelle de ce genre, Lella Lbatoul a songé,—auprès du petit cadavre qui
ne réclamait plus aucun soin,—à m’envoyer les odorants pétales et les
friandises, dont la délicatesse atténuerait, pour moi, l’ombre de ce malheur.

30 juin.
Douceur!... Quiétude!... Plaisant repos!...

La vie qui s’exprime en gestes harmonieux et lents sous les vêtements

aux nobles plis... Siestes et rêveries prolongées dans l’ombre des salles où
tout a été conçu pour la jouissance des yeux. Les rosaces des mosaïques
rayonnent le long des parois, d’une infinie variété en leur apparente
similitude; les frises déroulent leurs dentelles de stuc, et, lorsque le regard
atteint le plafond, il se perd délicieusement parmi les arabesques et les
lignes qui se poursuivent, se rejoignent et s’enlacent avec une surprenante
harmonie.
Esclaves! accourez à l’appel du maître, sur vos pieds nus que ne
sauraient meurtrir les tapis, les marbres, ni l’émail des carrelages.
Esclaves! il y a des mouches importunes, agitez les mouchoirs de soie.
 Ouvrez les portes si bien ciselées, qui semblent les gigantesques et
précieux battants de tabernacles chrétiens, afin que l’air du soir rafraîchisse
la salle et chasse les dernières fumées du santal dont s’embaumèrent les
somnolences. Au delà des arcades, apparaît la cour pavée de faïences, que
les reflets du ciel moirent d’une luisante eau bleue, et la vasque toute
ruisselante où s’abreuvent des tourterelles.
Fraîcheur!... Délices!... Monotone et limpide chanson des jets d’eau!...
Esclaves! apportez les plateaux d’argent chargés de tasses. Ils brillent
entre vos mains noires comme le contraste d’une parure. Avancez en roulant
vos hanches! Que le samovar qui vous courbe fasse valoir vos lourdes
splendeurs!
L’existence est chose facile et voluptueuse, ô négresses! Sur vos
destinées furent écrites la servitude et les besognes familières, mais aussi
les plaisirs d’amour.
—«Lequel des bienfaits de Dieu nierez-vous[83]?»
Il a donné à ses croyants l’inestimable faveur d’une vie sans fièvres et
sans heurts, sans l’agitation qui consume les peuples d’Occident, sans les
raisonnements, et les recherches dont il torture leurs cerveaux, sans la
tension exaspérée de leurs volontés vers des buts superflus.
Il a donné aux misérables tout l’or des soleils couchants à contempler
chaque soir le long des remparts; les repos à l’abri des treilles; les récits des
conteurs publics; l’insouciante paresse de lézards qui vivent d’une mouche
entre deux torpeurs.
Il a donné à d’autres de petites échoppes pour somnoler parmi les
babouches, les poteries, les écheveaux de soie; les parties d’échecs au coin
d’une place; les ânillons trottinants que l’on chevauche sur les reins, tout au
bout, presque à la naissance de la queue, tandis que les jambes trop longues
effleurent la poussière.
Il a donné aux lettrés leurs blanches mousselines et leur air dévot, leur
esprit subtil; le charme des absurdes discussions théologiques; les livres
ornés de miniatures—trésors de poésie, de science et d’ingéniosité—les
mosquées aux nattes fines où l’on accomplit soigneusement les rites
prescrits pour les cinq prières.
Il a donné aux riches les belles demeures, les sofas, les innombrables
coussins, les esclaves et les parfums; les arsas verdoyantes où les branches
fléchissent, accablées sous trop de fruits; les divertissements de la musique
et des festins; les mules qui s’en vont d’un pas si tranquille, régulier et sûr,
avec leurs selles très confortables, vêtues de drap rouge, et leurs larges
étriers.
Il a donné aux femmes les terrasses et les voisines, les noces, les parures,
les bavardages, les messagères, les revendeuses complaisantes et la
distraction nocturne des hammams.
Il a donné aux morts des cimetières sans tristesse, à l’ombre des
micocouliers, des cimetières où l’on s’efface très vite, en un même néant
sous les fleurs...
«Lequel des bienfaits d’Allah nierez-vous?»
Il a donné à tous un bien suprême: la paix.
Allures paisibles.
Esprits paisibles.
Bonheurs paisibles.

Cela que nous ignorons.

FIN

E. GREVIN—IMPRIMERIE DE LAGNY—232-4-22.

NOTES:
[1] Chérif. Descendant du Prophète.
[2] Maghzen, gouvernement du Sultan.
[3] Mida, petite table ronde et très basse.
[4] Sultan contemporain de Louis-Philippe.
[5] Dynastie des sultans actuels.
[6] Mets marocains dans la composition desquels entrent toujours des viandes.
 [7] Habitants de Rabat.
[8] Jardin intérieur.
[9] Nom donné aux chrétiens.
[10] Titre qui devrait être réservé aux Cherifas, mais que, par politesse, on donne
indifféremment à toutes les femmes, ainsi que, en France, «Madame» ou
«Mademoiselle».
[11] Vergers marocains.
[12] Expression très courante signifiant à peu près «être généreux sans rien
ménager».
[13] Le grand sultan contemporain de Louis XIV.
[14] Habitants de Meknès.
[15] Lieu «d’où l’on voit», sorte de belvédère.
[16] Petits fourneaux de terre.
[17] Robe de dessus transparente.
[18] Foulard de tête.
[19] Sorte de gros bourrelets encadrant la tête sur lesquels est appliqué le foulard
de soie.
[20] Tuteur-gardien.
[21] Attention.
[22] Le dirigeant, le gouverneur.
[23] Le verbe «carotter» est passé dans la langue arabe et conjugué selon les
règles.
[24] Marché aux étoffes.
[25] Sauf ton respect.
[26] Vendeur de café.
[27] Les Musulmans qui n’auront point fait à leurs épouses des parts égales,
paraîtront devant Allah «avec des fesses inégales» (Commentaire du Coran).
[28] Sorte de soupe très épicée.
[29] Cruche ventrue en cuivre, dont le fond est arrondi et qui ne peut se tenir sans
branler.
[30] Le grand sultan de Meknès contemporain de Louis XIV.
[31] Instrument à deux cordes.
[32] Les plus beaux foulards de tête sont ainsi nommés parce que, très lourds, ils
s’achètent au poids.
[33] Maîtresse des cérémonies.
 [34] De la maison impériale.
[35] Garçon qui porte les pains au four et les rapporte à domicile.
[36] La dot, en droit coranique, est versée par le mari.
[37] Formule équivalant à «sauf ton respect».
[38] Chef de la famille impériale dans une ville.
[39] Pièce indépendante du reste de la maison, où le maître reçoit ses amis.
[40] 8000 francs.
[41] L’an 1330 de l’hégire, (1911 de l’ère chrétienne).
[42] Sorte de vermicelle.
[43] Coran.
[44] Prévôt des marchands.
[45] Cour du Sultan.
[46] 125 francs.
[47] Guinéens. Nègres originaires de Guinée qui forment une sorte de confrérie.
[48] Voile de soie tombant jusqu’aux reins et réservé aux Juives mariées.
[49] Eau-de-vie de figues.
[50] 0 fr. 25.
[51] Hanna avait sept enfants, qui furent tués sur ses genoux à la prise de
Jérusalem.
[52] Bénédiction apportant la chance.
[53] Coran. Verset du trône.
[54] La fumée.
[55] L’indigène préposé aux canalisations.
[56] Alcôve formée par des draperies, où la mariée reste enfermée.
[57] Pantalon.
[58] Tenture murale.
[59] Water-closet.
[60] Feuilles des palmiers nains, qui servent à chauffer les fours.
[61] Romains.
[62] Le geai bleu ou chasseur d’Afrique.
[63] Eau-de-vie de figues.
[64] Tenture murale décorée en forme d’arcades.
[65] La plus monumentale porte du Maroc, à Meknès.
 [66] Pantalon.
[67] Nom fantaisiste de tribu.
[68] Étudiant. Les «étudiants» s’adonnent souvent à la sorcellerie.
[69] Sorte de gâteau.
[70] Formule de repentir.
[71] Vieux chant maure andalou.
[72] 0 fr. 25.
[73] Arsenic.
[74] Pièce du logis ayant une issue indépendante.
[75] Se faire épouser avec reconnaissance dotale.
[76] Quartier de Meknès.
[77] Nom d’un génie.
[78] Coran. Sourate du Soleil.
[79] Les trois premières invocations sont adressées à des saints, les autres à des
génies mâles et femelles.
[80] Coran. Sourate du «Jour qui enveloppe».
[81] Instrument de musique à deux cordes.
[82] Formule très respectueuse d’assentiment, d’inférieur à supérieur.
[83] Coran.
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