A Strategy-proof Mechanism For Networked Housing Markets

Abstract: This paper studies a house allocation problem in a networked housing market, where agents can invite others to join the system in order to enrich their options. Top Trading Cycle is a well-known matching mechanism that achieves a set of desirable properties in a market without invitations. However, under a tree-structured networked market, existing agents have to strategically propagate the barter market as their invitees may compete in the same house with them. Our impossibility result shows that TTC cannot work properly in a networked housing market. Hence, we characterize the possible competitions between inviters and invitees, which lead agents to fail to refer others truthfully (strategy-proof). We then present a novel mechanism based on TTC, avoiding the aforementioned competition to ensure all agents report preference and propagate the barter market truthfully. Unlike the existing mechanisms, the agents' preferences are less restricted under our mechanism. Furthermore, we show by simulations that our mechanism outperforms the existing matching mechanisms in terms of the number of swaps and agents' satisfaction.