Incentive Compatible Market Design with an Application to Matching with Wages

This paper studies markets for heterogeneous goods using mechanism-design theory. For each combination of desirable properties, I derive an assignment process with these properties in the form of a corresponding direct-revelation game, or I show that it does not exist. Each participant’s preferences are quasi-linear in money, and depend upon the allocation that he gets – thus, a participant’s privately known type is multidimensional. The key properties are individual rationality, incentive compatibility, budget balance, efficiency, and stability against coalitional deviations. The main results characterize mechanisms that are ex post incentive compatible in combination with other properties.