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Fairness and Efficiency for Probabilistic Allocations with Endowments

Federico Echenique (), Antonio Miralles and Jun Zhang

No 1055, Working Papers from Barcelona Graduate School of Economics

Abstract: We propose to use endowments as a policy instrument in market design. Endowments give agents the right to enjoy certain resources. For example in school choice, one can ensure that low-income families have a shot at high-quality schools by endowing them with a chance of admission. Common policy objectives, such as walkzone or sibling placement can be achieved through endowments (arguably more transparently than via priorities). We introduce two new criteria in resource allocation problems with endowments. The first adapts the notion of justified envy to a model with endowments, while the second is based on market equilibrium. Using either criteria, we show that fairness (understood as the absence of justified envy) can be obtained together with efficiency and individual rationality.

Keywords: efficiency; fairness and endowments (search for similar items in EconPapers)
JEL-codes: D47 D50 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des and nep-gth
Date: 2018-09
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