Community Costs in Neighborhood Help Problems

Sarah Kühn and Nadja Stroh-Maraun ()
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Nadja Stroh-Maraun: Paderborn University

No 167, Working Papers CIE from Paderborn University, CIE Center for International Economics

Abstract: We define neighborhood help problems where agents may seek and/or provide various kinds of help as matching markets with an explicitly modeled outside option. In most matching markets a short supply of compatible helpers may result in many agents being unmatched, forcing them to rely on costly outside options. These unmatched agents leave the market without helping and substantial potential is lost. To overcome this issue we introduce the pool option which incentivizes agents to provide help while receiving help outside the market. By explicitly modeling the outside option our model becomes applicable to a broad range of applications. The top trading cycles (TTC) mechanism (Shapley & Scarf, 1974) no longer provides a Pareto efficient allocation in this setting. Thus, we propose the neighborhood top trading cycles and chains (NTTCC) mechanism which incorporates the pool option and is based on the TTCC by Roth et al. (2004). The NTTCC is individual rational, Pareto efficient, and strategy-proof. The NTTCC (weakly) reduces overall costs compared to the TTC. More generally, the NTTCC is cost-minimal in the class of individual rational and Pareto-efficient mechanisms.

Keywords: Matching; School Choice; Kidney Exchange; Top Trading Cycles; Pareto Efficiency; Strategy-Proofness (search for similar items in EconPapers)
JEL-codes: C78 D47 (search for similar items in EconPapers)
Pages: 36
Date: 2025-10
New Economics Papers: this item is included in nep-des
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Working Paper: Community Costs in Neighborhood Help Problems (2025)
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