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Efficient assignment with interdependent values

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  • Che, Yeon-Koo
  • Kim, Jinwoo
  • Kojima, Fuhito

Abstract

We study the “house allocation” problem in which n agents are assigned n objects, one for each agent, when the agents have interdependent values. We show that there exists no mechanism that is Pareto efficient and ex-post incentive compatible, and the only mechanism that is ex-post group incentive compatible is constant across states. By contrast, we demonstrate that a Pareto efficient and Bayesian incentive compatible mechanism exists in the two agent house-allocation problem, given sufficient congruence of preferences and the standard single crossing property. We also show that (approximate) Pareto efficiency can be achieved once we relax the incentive compatibility requirements to approximate ex-post incentive compatibility or Bayesian incentive compatibility.

Suggested Citation

  • Che, Yeon-Koo & Kim, Jinwoo & Kojima, Fuhito, 2015. "Efficient assignment with interdependent values," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 54-86.
    • Handle: RePEc:eee:jetheo:v:158:y:2015:i:pa:p:54-86
    DOI: 10.1016/j.jet.2015.03.008
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    3. Hashimoto, Tadashi, 2018. "The generalized random priority mechanism with budgets," Journal of Economic Theory, Elsevier, vol. 177(C), pages 708-733.
    4. Dizdar, Deniz & Moldovanu, Benny, 2016. "On the importance of uniform sharing rules for efficient matching," Journal of Economic Theory, Elsevier, vol. 165(C), pages 106-123.

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    More about this item

    Keywords

    House allocation problem; Efficient assignment; Interdependent values; Ex-post implementation; Approximate ex-post implementation; Bayesian implementation;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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