Balanced equilibrium in pseudo-markets with endowments

Federico Echenique, Antonio Miralles and Jun Zhang

Games and Economic Behavior, 2023, vol. 141, issue C, 428-443

Abstract: In a variant of Hylland and Zeckhauser (1979)'s model that allows agents to start out with different endowments, we develop a pseudo-market procedure that allows the policymaker to decide to what extent individual endowment differences shall be balanced by the average endowment. Our procedure sidesteps the known non-existence problem of Walrasian equilibria, and finds an efficient and balanced individually-rational allocation. Envy in our procedure is justified in a utilitarian sense: an envying agent's endowment must make a lower contribution to standard weighted utilitarian welfare than that of the envied agent.

Keywords: Discrete allocation; Endowment; Pseudo-market procedure; Balanced individual rationality (search for similar items in EconPapers)
JEL-codes: D47 D50 D60 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:141:y:2023:i:c:p:428-443

DOI: 10.1016/j.geb.2023.07.002

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