Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2012:18: Non-Manipulable House Allocation with Rent Control

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

Abstract: In many real-life house allocation problems, rents are bounded from above by price ceilings imposed by a government or a local administration. This is known as rent control. Because some price equilibria may be disqualified given such restrictions, this paper proposes an alternative equilibrium concept, called rationing price equilibrium, tailored to capture the specific features of housing markets with rent control. An allocation rule that always selects a rationing price equilibrium is defined, and it is demonstrated to be ``efficient" and (group) non-manipulable for ``almost all" preference profiles. In its bounding cases, the rule reduces to a number of well-known mechanisms from the matching literature. In this sense, the housing market with rent control investigated in this paper integrates several of the predominant matching models into a more general framework.

Keywords: House allocation; rent control; rationing; rationing price equilibrium; priority efficiency; non-manipulability

JEL-codes: C71; C78; D63; D71; D78

28 pages, First version: June 28, 2012. Revised: September 18, 2013. Earlier revisions: June 10, 2013, June 10, 2013.

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