Matching Markets with Mixed Ownership: The Case for a Real‐Life Assignment Mechanism

Abstract

We consider a common indivisible good allocation problem whose popular applications include on‐campus housing, kidney exchange, and school choice. We show that the so‐called New House 4 (NH4) mechanism, which has been in use at MIT since the 1980s, is equivalent to a natural adaptation of the well‐known Gale–Shapley (GS) mechanism. We run two experiments comparing NH4 with the prominently advocated Top Trading Cycles (TTC) mechanism and NH4 with GS. We find that under NH4, the participation rate is significantly higher than under TTC. Based on a new ordinal test of efficiency, NH4 is more likely to Pareto dominate TTC.