Fairness and efficiency for allocations with participation constraints

Federico Echenique, Antonio Miralles and Jun Zhang

Journal of Economic Theory, 2021, vol. 195, issue C

Abstract: We propose a notion of fairness for allocation problems in which different agents may have different reservation utilities, stemming from different outside options, or property rights. Fairness is usually understood as the absence of envy, but this can be incompatible with reservation utilities. It is possible that Alice's envy of Bob's assignment cannot be remedied without violating Bob's participation constraint. Instead, we seek to rule out justified envy, defined as envy for which a remedy would not violate any agent's participation constraint. We show that fairness, meaning the absence of justified envy, can be achieved together with efficiency and individual rationality. We introduce a competitive equilibrium approach with price-dependent incomes obtaining the desired properties.

Keywords: Fairness; Justified envy; Efficiency; Participation constraint; Pseudo-market equilibrium (search for similar items in EconPapers)
JEL-codes: C71 C78 D71 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:195:y:2021:i:c:s0022053121000910

DOI: 10.1016/j.jet.2021.105274

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