Incentive Compatible Allocation and Exchange of Discrete Resources
AbstractAllocation 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 InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 715.
Date of creation: 01 Jan 2009
Date of revision: 11 Mar 2014
Note: Previously circulated as "A Theory of House Allocation and Exchange Mechanisms"
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Mechanism design; group strategy-proofness; Pareto efficiency; matching; house allocation; house exchange; outside options;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-CTA-2009-10-24 (Contract Theory & Applications)
- NEP-GTH-2009-10-24 (Game Theory)
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