OBVIOUSLY STRATEGY‐PROOF IMPLEMENTATION OF TOP TRADING CYCLES

Peter Troyan

International Economic Review, 2019, vol. 60, issue 3, 1249-1261

Abstract: Although there is a rich theoretical literature extolling the virtues of the top trading cycles (TTCs) mechanism, it is rarely used in practice. Anecdotal evidence suggests that one possible explanation is that TTC is difficult for participants to understand. This article formalizes this intuition by asking whether it is possible to implement TTC in an obviously strategy‐proof (OSP) way. I identify an acyclicity condition that is both necessary and sufficient for OSP implementation of TTC. The condition is unlikely to hold in most applications, which may explain why TTC is rarely used, despite its many appealing theoretical properties.

Date: 2019
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