Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2000:11: Strategy-Proof and Nonbossy Allocation of Indivisible Goods and Money

Lars-Gunnar Svensson () and Bo Larsson ()
Additional contact information
Lars-Gunnar Svensson: Department of Economics, Lund University, Postal: Box 7082, S-220 07 Lund, Sweden
Bo Larsson: Department of Economics, Lund University, Postal: Box 7082, S-220 07 Lund, Sweden

Abstract: Which strategy-proof nonbossy mechanisms exist in a model with a finite number of indivisible goods (houses, jobs, positions) and a compensating perfectly divisible good (money)? The main finding is that only a finite number of distributions of the divisible good is consistent with strategy-proofness and nonbossiness. Under various additional assumptions - neutrality, individual rationality, object efficiency, weak decentralization - the distribution of the divisible good is further restricted. For instance, under neutrality the outcome of the mechanism can have only one distribution, which is hence independent of individual preferences. In this case the mechanism becomes serially dictatorial. On the other hand, individual rationality leads to a fixed-price equilibrium with a well defined rationing method (Gale's top trading cycle procedure).

Keywords: Strategy-proofness; housing market; indivisible objects

JEL-codes: C71; C78; D71; D78

23 pages, September 18, 2000

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