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Efficiency, Justified Envy, and Incentives in Priority-Based Matching

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  • Atila Abdulkadiroğlu
  • Yeon-Koo Che
  • Parag A. Pathak
  • Alvin E. Roth
  • Olivier Tercieux

Abstract

Top trading cycles (TTC ) is Pareto efficient and strategy-proof in priority-based matching, but so are other mechanisms including serial dictatorship. We show that TTC minimizes justified envy among all Pareto-efficient and strategy-proof mechanisms in one-to-one matching. In many-to-one matching, TTC admits less justified envy than serial dictatorship in an average sense. Empirical evidence from New Orleans OneApp and Boston Public Schools shows that TTC has significantly less justified envy than serial dictatorship.

Suggested Citation

  • Atila Abdulkadiroğlu & Yeon-Koo Che & Parag A. Pathak & Alvin E. Roth & Olivier Tercieux, 2020. "Efficiency, Justified Envy, and Incentives in Priority-Based Matching," American Economic Review: Insights, American Economic Association, vol. 2(4), pages 425-442, December.
    • Handle: RePEc:aea:aerins:v:2:y:2020:i:4:p:425-42
    DOI: 10.1257/aeri.20190307
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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