Incentive Compatible Allocation and Exchange of Discrete Resources

Marek Pycia and Utku Unver
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Marek Pycia: UCLA

No 715, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We study the allocation and exchange of discrete resources--such as kidneys or school seats--in environments in which monetary transfers are not allowed. We introduce a new class of direct mechanisms that we call trading cycles, and show that a mechanism is group dominant-strategy incentive compatible and Pareto efficient if and only if it is equivalent to a trading-cycles mechanism. The class contains new mechanisms as well as such previously studied mechanisms as top trading cycles, serial dictatorships, and hierarchical exchange. In some problems, the new trading-cycles mechanisms perform better than all previously known mechanisms. Just as importantly, knowing that all group incentive-compatible and efficient mechanisms belong to our class allows us to easily determine which efficient outcomes can and cannot be achieved in a group incentive-compatible way.

Keywords: Mechanism design; group strategy-proofness; Pareto efficiency; matching; house allocation; house exchange; outside options (search for similar items in EconPapers)
JEL-codes: C78 D78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-gth
Date: 2009-01-01, Revised 2011-11-17
Note: Previously circulated as "A Theory of House Allocation and Exchange Mechanisms"
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