An impossibility in housing markets with contracts

Jinyong Jeong ()
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Jinyong Jeong: Li Anmin Institute of Economic Research, Liaoning University

Economics Bulletin, 2026, vol. 46, issue 2, 767 - 778

Abstract: This paper extends the classical housing-market model of Shapley and Scarf (1974) to an environment with contractual terms and demonstrates an impossibility result: no mechanism can simultaneously satisfy Pareto efficiency, term-consistent property rights, and strategy-proofness. The result isolates how introducing contractual dimensions disrupts the alignment of incentives that underlies the top trading cycles mechanism. The analysis identifies the minimal structure generating nonexistence and clarifies the limits of truthful implementation in exchange economies with indivisible goods and contract-contingent rights.

Keywords: housing markets; contracts; strategy-proofness; mechanism design; matching (search for similar items in EconPapers)
JEL-codes: C7 D4 (search for similar items in EconPapers)
Date: 2026-06-30
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