Abstract
We consider a common indivisible good allocation problem whose popular applications include on‐campus housing, kidney exchange, and school choice. We show that the so‐called New House 4 (NH4) mechanism, which has been in use at MIT since the 1980s, is equivalent to a natural adaptation of the well‐known Gale–Shapley (GS) mechanism. We run two experiments comparing NH4 with the prominently advocated Top Trading Cycles (TTC) mechanism and NH4 with GS. We find that under NH4, the participation rate is significantly higher than under TTC. Based on a new ordinal test of efficiency, NH4 is more likely to Pareto dominate TTC.
Highlights
In this paper we study the problem of assigning a set of indivisible goods, without explicitly using monetary transfers, to a set of agents some of whom may have prior claims to some of the goods
There exists no (i; h) 2 I H such that either (i) h Pi (i) and 1(h) = ;, or (ii) h Pi (i) and Fh 1(i) < Fh 1( 1(h)): Given a house allocation problem (f; P ), the outcome of the Gale-Shapley (GS) mechanism is obtained by applying the following deferred acceptance (DA) algorithm (Gale and Shapley, 1962) to the associated school choice problem (F; P ): Step 1: Each agent applies to her top choice house
In this paper we have studied the problem of ...nding the “right” house allocation mechanism to allocate on-campus housing units to students from a market-design perspective
Summary
In this paper we study the problem of assigning a set of indivisible goods, without explicitly using monetary transfers, to a set of agents some of whom may have prior claims to some of the goods. The performance of a mechanism is evaluated along four merits: (1) individual rationality (i.e., an existing tenant should be encouraged to participate by giving her the guarantee of obtaining a house that is no worse than her occupied house); (2) e¢ ciency (i.e., resources should be optimally allocated according to the preferences of agents); (3) fairness (i.e., the assignment should respect the priority order); and (4) incentive compatibility Abdulkadiroglu and Sönmez (1999), arguing that some of these e¢ ciency losses can be recovered if existing tenants are instead allowed to trade their houses through a market-like procedure, proposed the top trading cycles (TTC) mechanism.[12] TTC is individually rational, Pareto e¢ cient, and incentive compatible (Abdulkadiroglu and Sönmez, 1999).
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