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Strategy-proof and nonbossy allocation of indivisible goods and money

  • Lars-Gunnar Svensson


    (Department of Economics, Lund University, Box 7082, S-22007 Lund, SWEDEN)

  • Bo Larsson


    (Department of Economics, Lund University, Box 7082, S-22007 Lund, SWEDEN)

Which strategy-proof nonbossy mechanisms exist in a model with a finite number of indivisible goods (houses, jobs, positions) and a perfectly divisible good (money)? The main finding is that only a finite number of distributions of the divisible good is consistent with strategy-proofness and nonbossiness. Under various additional assumptions - neutrality, individual rationality, object efficiency, weak decentralization - the distribution of the divisible good is further restricted. For instance, under neutrality the outcome of the mechanism can have only one distribution, which is hence independent of individual preferences. In this case the mechanism becomes serially dictatorial. On the other hand, individual rationality leads to a fixed price equilibrium with a well-defined rationing method (Gale's top-trading cycle procedure).

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Article provided by Springer in its journal Economic Theory.

Volume (Year): 20 (2002)
Issue (Month): 3 ()
Pages: 483-502

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Handle: RePEc:spr:joecth:v:20:y:2002:i:3:p:483-502
Note: Received: October 3, 2000; revised version: August 10, 2001
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