Reallocation with Priorities

Julien Combe and Jan Christoph Schlegel

No 2021-09, Working Papers from Center for Research in Economics and Statistics

Abstract: We consider a reallocation problem with priorities where each agent is initially endowed with a house and is willing to exchange it but each house has a priority ordering over the agents of the market. In this setting, it is well known that there is no individually rational and stable mechanism. As a result, the literature has introduced a modified stability notion called µ0-stability. In contrast to college admission problems, in which priorities are present but there is no initial endowment, we show that the modified Deferred Acceptance mechanism identified in the literature is not the only individually rational, strategy-proof and µ0-stable mechanism. By introducing a new axiom called the independence of irrelevant agents and using the standard axiom of unanimity, we show that the modified Deferred Acceptance mechanism is the unique mechanism that is individually rational, strategy-proof, µ0-stable, unanimous and independent of irrelevant agents.

Keywords: Matching; Housing Market; Reallocation; Stability; Priorities. (search for similar items in EconPapers)
JEL-codes: C78 D47 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2021-06-03
New Economics Papers: this item is included in nep-des, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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