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Matching with restricted trade

Author

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  • Mustafa Oǧuz Afacan

    (Sabancı University)

Abstract

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 RTC 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.

Suggested Citation

  • Mustafa Oǧuz Afacan, 2019. "Matching with restricted trade," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(3), pages 957-977, September.
    • Handle: RePEc:spr:jogath:v:48:y:2019:i:3:d:10.1007_s00182-019-00667-3
    DOI: 10.1007/s00182-019-00667-3
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    References listed on IDEAS

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    Cited by:

    1. Pan, Lijun & Peng, Linyu & Zhou, Yu, 2020. "An assignment model with local constraints: Competitive equilibrium and ascending auction," Economics Letters, Elsevier, vol. 188(C).

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    More about this item

    Keywords

    Restricted trading cycles; Trade restrictions; Matching; Feasibility; Characterization;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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