Efficient Allocation of Indivisible Goods in Pseudomarkets with Constraints

Faruk Gul, Wolfgang Pesendorfer and Mu Zhang

Journal of Political Economy, 2024, vol. 132, issue 11, 3708 - 3736

Abstract: We provide conditions under which a market mechanism can be used to allocate indivisible goods efficiently. We consider an economy with no transfers and show the existence and efficiency of Walrasian equilibria in the corresponding pseudomarket with stochastic consumption. We demonstrate that constraints on minimum and maximum levels of individual consumption and aggregate constraints of the kind that are relevant in combinatorial allocation problems can be accommodated either by incorporating these constraints into individual preferences or by specifying a suitable production technology.

Date: 2024
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