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An alternative characterization of top trading cycles

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  • Thayer Morrill

Abstract

This paper introduces two new characterizations of the top trading cycles algorithm. The key to our characterizations is a new condition, independence of irrelevant rankings (IIR). Intuitively, a mechanism satisfies IIR if whenever an agent’s ranking at an object is irrelevant to her assignment, then it is irrelevant to the assignment of all agents. We demonstrate that a mechanism is Pareto efficient, strategy-proof, IIR, and satisfies mutual best if and only if it is top trading cycles. This provides a new insight into what distinguishes top trading cycles from all other efficient and strategy-proof assignment mechanisms. We provide a second characterization in terms of weak Maskin monotonicity. A mechanism satisfies Pareto efficiency, weak Maskin monotonicity, IIR, and mutual best if and only if it is top trading cycles. This allows us to directly compare top trading cycles to known characterizations of the deferred acceptance algorithm in terms of weak Maskin monotonicity. Copyright Springer-Verlag 2013

Suggested Citation

  • Thayer Morrill, 2013. "An alternative characterization of top trading cycles," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(1), pages 181-197, September.
    • Handle: RePEc:spr:joecth:v:54:y:2013:i:1:p:181-197
    DOI: 10.1007/s00199-012-0713-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Top trading cycles; School choice; Assignment; C78; D61; J15; D78; I20;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I20 - Health, Education, and Welfare - - Education - - - General

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