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The probabilistic serial mechanism with private endowments

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  • YIlmaz, Özgür

Abstract

A random assignment is ordinally efficient if it is not stochastically dominated with respect to individual preferences over sure objects. When there are no private endowments, the set of ordinally efficient random assignments is characterized by the eating algorithm (Bogomolnaia and Moulin, 2001). When there are private endowments, the main requirement is individual rationality; however, the eating algorithm fails to deliver this property. Our contribution is the natural generalization of the eating algorithm for this general class of problems. The family of this generalized eating algorithm characterizes the set of individually rational and ordinally efficient random assignments. A special solution in this family, the individually rational probabilistic serial (PSIR), also achieves a new fairness axiom, no justified-envy. However, it is not immune to strategic manipulation. We show that individual rationality, no justified-envy and strategy-proofness are incompatible.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 69 (2010)
Issue (Month): 2 (July)
Pages: 475-491

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Handle: RePEc:eee:gamebe:v:69:y:2010:i:2:p:475-491

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Random assignment No justified-envy Ordinal efficiency Simultaneous eating algorithm;

References

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  1. Ma, Jinpeng, 1994. "Strategy-Proofness and the Strict Core in a Market with Indivisibilities," International Journal of Game Theory, Springer, vol. 23(1), pages 75-83.
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  14. Abdulkadiroglu, Atila & Sonmez, Tayfun, 2003. "Ordinal efficiency and dominated sets of assignments," Journal of Economic Theory, Elsevier, vol. 112(1), pages 157-172, September.
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Cited by:
  1. Onur Kesten & M. Utku Ünver, 2010. "A Theory of School-Choice Lotteries," Boston College Working Papers in Economics 737, Boston College Department of Economics, revised 29 Jun 2012.
  2. Alcalde, Jose & Silva-Reus, José Ángel, 2013. "Allocating via Priorities," QM&ET Working Papers 13-3, Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica.

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