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Community Costs in Neighborhood Help Problems

Author

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  • Sarah Kühn

    (Paderborn University)

  • Nadja Stroh-Maraun

    (Paderborn University)

Abstract

We define neighborhood help problems where agents may seek and/or provide various kinds of help as matching markets with an explicitly modeled outside option. In most matching markets a short supply of compatible helpers may result in many agents being unmatched, forcing them to rely on costly outside options. These unmatched agents leave the market without helping and substantial potential is lost. To overcome this issue we introduce the pool option which incentivizes agents to provide help while receiving help outside the market. By explicitly modeling the outside option our model becomes applicable to a broad range of applications. The top trading cycles (TTC) mechanism (Shapley & Scarf, 1974) no longer provides a Pareto efficient allocation in this setting. Thus, we propose the neighborhood top trading cycles and chains (NTTCC) mechanism which incorporates the pool option and is based on the TTCC by Roth et al. (2004). The NTTCC is individual rational, Pareto efficient, and strategy-proof. The NTTCC (weakly) reduces overall costs compared to the TTC. More generally, the NTTCC is cost-minimal in the class of individual rational and Pareto-efficient mechanisms.

Suggested Citation

  • Sarah Kühn & Nadja Stroh-Maraun, 2025. "Community Costs in Neighborhood Help Problems," Working Papers Dissertations 158, Paderborn University, Faculty of Business Administration and Economics.
    • Handle: RePEc:pdn:dispap:158
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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