Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2014:24: How to Efficiently Allocate Houses under Price Controls?

Tommy Andersson (), Zaifu Yang () and Dongmo Zhang ()
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
Zaifu Yang: Department of Economics and Related Studies, University of York, Postal: Department of Economics and Related Studies, University of York, Heslington, York, YO10 5DD, UK
Dongmo Zhang: Intelligent Systems Laboratory, University of Western Sydney, Postal: University of Western Sydney, Locked Bag 1797, Penrith South DC, NSW 2751, Australia

Abstract: Price controls are used in many regulated markets and well recognized as the cause of market inefficiency. This paper examines a practical housing market in the presence of price controls and provides a solution to the problem of how houses should be efficiently allocated among agents through a system of prices. We demonstrate that the dynamic auction by Talman and Yang (2008) always finds a core allocation in finitely many iterations, thus resulting in a Pareto efficient outcome.

Keywords: Ascending auction; assignment market; price control; Pareto efficiency; core

JEL-codes: C71; D44; D47

17 pages, June 13, 2014

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