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Let them cheat!

Rodrigo Velez () and William Thomson

Games and Economic Behavior, 2012, vol. 75, issue 2, 948-963

Abstract: We consider the problem of fairly allocating a bundle of infinitely divisible goods among a group of agents with “classical” preferences. We propose to measure an agentʼs “sacrifice” at an allocation by the size of the set of feasible bundles that the agent prefers to her consumption. As a solution, we select the allocations at which sacrifices are equal across agents and this common sacrifice is minimal. We then turn to the manipulability of this solution. In the tradition of Hurwicz (1972), we identify, under some mild assumptions on preferences, the equilibrium allocations of the manipulation game associated with this solution when all commodities are normal: for each preference profile, each equal-division constrained Walrasian allocation is an equilibrium allocation; conversely, each equilibrium allocation is equal-division constrained Walrasian. Furthermore, we show that if normality of goods is dropped, then equilibrium allocations may not be equal-division constrained Walrasian.

Keywords: Equal-sacrifice solution; Manipulation game; Equal-division Walrasian solution (search for similar items in EconPapers)
JEL-codes: C72 D63 (search for similar items in EconPapers)
Date: 2012
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Working Paper: Let them cheat! (2009) Downloads
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