A Pseudo-Market Approach to Allocation with Priorities∗

We propose a pseudo-market mechanism for no-transfer allocation of indivisible objects that honors priorities such as those in school choice. Agents are given token money, face priority-specific prices, and buy utility-maximizing assignments. The mechanism is asymptotically incentive compatible, and the resulting assignments are fair and constrained Pareto efficient. Hylland and Zeckhauser (1979)’s position-allocation problem is a special case of our framework, and our results on incentives and fairness are also new in their classical setting.