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Achieving the maximum size for exchange problems with dichotomous preferences

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  • Yan Long

    (Huazhong University of Science and Technology)

Abstract

We consider an exchange problem with dichotomous preferences, and agents endowed with acceptable (unacceptable) objects can exchange their endowments with other acceptable (unacceptable) objects in order to achieve the “maximum size” of the problem, that is, the maximum number of agents who obtain acceptable objects. We observe that the priority mechanisms appeared in the literature before are not fully incentive-compatible—agents may pretend that their endowments are acceptable to themselves to get better results. We construct a new class of mechanisms called “endowment-respecting priority mechanisms” to solve this problem. Our mechanisms are dominant strategy incentive-compatible, individually rational, and always achieve the maximum size.

Suggested Citation

  • Yan Long, 2024. "Achieving the maximum size for exchange problems with dichotomous preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(2), pages 649-669, September.
    • Handle: RePEc:spr:joecth:v:78:y:2024:i:2:d:10.1007_s00199-023-01536-7
    DOI: 10.1007/s00199-023-01536-7
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    References listed on IDEAS

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    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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