Stable and Efficient Resource Allocation with Contracts

Bobak Pakzad-Hurson

American Economic Journal: Microeconomics, 2023, vol. 15, issue 2, 627-59

Abstract: Consider indivisible-object allocation with contracts, such as college admissions, where contracts specify majors. Can a designer guarantee a stable and (student) efficient matching? I show that contracts put stability and efficiency at odds; a necessary condition to ensure these properties is student-lexicographic priorities—schools must rank contracts from "second-tier" students consecutively. I present the weakest restriction guaranteeing stability and efficiency, and characterize necessary and sufficient conditions for any mechanism within a general class to deliver a stable and efficient matching in an incentive compatible manner. I apply this result to two well-known mechanisms: deferred acceptance and top trading cycles.

JEL-codes: C78 D82 D86 I23 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/mic.20210109

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