Matching with restricted trade
Afacan, Mustafa Oğuz (2018) Matching with restricted trade. [Working Paper / Technical Report] Sabanci University ID:UNSPECIFIED
Motivated by various trade restrictions in real-life object allocation problems, we introduce an object allocation with a particular class of trade restrictions model. The set of matchings that can occur through a market-like process under such restrictions is defined, and each such matching is called feasible. We then introduce a class of mechanisms, which we refer to as “Restricted Trading Cycles” (RTC). Any RTC mechanism is feasible, constrained efficient, and respects endowments. An axiomatic characterization of RT C is obtained, with feasibility, constrained efficiency, and a new property that we call hierarchically mutual best. In terms of strategic issues, feasibility, constrained efficiency, and respecting endowments together turns out to be incompatible with strategy-proofness. This in particular implies that no RTC mechanism is strategy-proof. Lastly, we consider a probabilistically restricted trading cycles (PRTC) mechanism, which is obtained by introducing a certain randomness to the RTC class. While PRTC continues to be manipulable, compared to RTC, it is more robust to truncations and reshufflings.
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