House allocation with transfers

We consider the Shapley-Scarf house allocation problem where monetary trans fers are allowed. We characterize the class of mechanisms that are strategy -proof ex post individually rational, ex. post budget-balanced, and "collus ion-proof" In these mechanisms, the price of each object is fixed in advanc e, and the objects are reallocated according to the (unique) core assignmen t of the Shapley-Scarf economy associated with the prices. The special case in which all prices are zero is the core mechanism studied by Shapley and Scarf. Our mechanisms are compelling alternatives to the Groves mechanisms, which satisfy neither budget balance nor our condition of collusion-proofn ess. (C) 2001 Academic, Press.