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Incentive Compatible Allocation and Exchange of Discrete Resources

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Author Info

  • Marek Pycia

    (UCLA)

  • M. Utku Ünver

    (Boston College)

Abstract

Allocation and exchange of discrete resources such as kidneys, school seats, and many other resources for which agents have single-unit demand is conducted via direct mechanisms without monetary transfers. Incentive compatibility and efficiency are primary concerns in designing such mechanisms. We show that a mechanism is indi- vidually strategy-proof and always selects the efficient outcome with respect to some Arrovian social welfare function if and only if the mechanism is group strategy-proof and Pareto efficient. We construct the full class of these mechanisms and show that each of them can be implemented by endowing agents with control rights over resources. This new class, which we call trading cycles, contains new mechanisms as well as known mechanisms such as top trading cycles, serial dictatorships, and hierarchical exchange. We illustrate how one can use our construction to show what can and what cannot be achieved in a variety of allocation and exchange problems, and we provide an example in which the new trading-cycles mechanisms strictly Lorenz dominate all previously known mechanisms.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 715.

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Date of creation: 01 Jan 2009
Date of revision: 11 Mar 2014
Handle: RePEc:boc:bocoec:715

Note: Previously circulated as "A Theory of House Allocation and Exchange Mechanisms"
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Related research

Keywords: Mechanism design; group strategy-proofness; Pareto efficiency; matching; house allocation; house exchange; outside options;

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References

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  1. Salvador Barbera, 1995. "Strategy-Proof Allotment Rules," Discussion Papers 1142, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Barbera, S. & Gul, F. & Stacchetti, E., 1992. "Generalized Median Voter Schemes and Committees," UFAE and IAE Working Papers 184.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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Cited by:
  1. Fuhito Kojima & M. Utku Ünver, 2010. "The 'Boston' School-Choice Mechanism," Boston College Working Papers in Economics 729, Boston College Department of Economics, revised 08 Oct 2010.
  2. Jaramillo, Paula & Manjunath, Vikram, 2012. "The difference indifference makes in strategy-proof allocation of objects," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1913-1946.
  3. Sophie Bade, 2011. "Pareto-Optimal Assignments by Hierarchical Exchange," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2011_11, Max Planck Institute for Research on Collective Goods.
  4. Daniel Monte & Norovsambuu Tumennasan, 2012. "Centralized Allocation in Multiple Markets," Economics Working Papers 2012-09, School of Economics and Management, University of Aarhus.
  5. Alexander Westkamp, 2013. "An analysis of the German university admissions system," Economic Theory, Springer, vol. 53(3), pages 561-589, August.

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