Incentive compatible market design with applications

Abstract

This paper studies markets for heterogeneous goods using mechanism-design theory. For each combination of desirable properties, we derive an assignment process with these properties in the form of a corresponding direct-revelation game, or we show that it does not exist. Each participant’s utility is quasi-linear in money, and depends upon the allocation that he gets and his privately known multidimensional ‘type.’ The key properties are incentive compatibility, individual rationality, efficiency, and budget balance. The main results characterize mechanisms that are ex post incentive compatible in combination with other properties.