Revealed Preference Analysis of Shapley-Scarf Housing Markets
We ask what the reallocation of indivisible objects reveals about the market that produced it. A central authority assigns the objects, after which recipients exchange them among themselves. Preferences are never observed, and individuals of the same type have identical preferences. A reallocation is rationalizable as Pareto efficient and individually rational exactly when a directed graph built from the data is acyclic, and as weak core-stable exactly when a mixed graph admits an orientation acyclic within types and free of alternating cycles. Deciding the latter is NP-complete, and on the single-crossing domain, although the test becomes more restrictive, it turns out to be more useful in practice. Both properties are less demanding than the strict core, so their rejection eliminates a broader set of possibilities. We apply the tests to administrative data on social housing lettings in England.