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Let them cheat!

Rodrigo Velez () and William Thomson

No 552, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: We consider the problem of fairly allocating a bundle of infinitely divisible commodities among a group of agents with "classical" preferences. We propose to measure an agent's "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, Decision and Organization, U. Minnesota Press), we identify the equilibrium allocations of the manipulation game associated with this solution when all commodities are normal: (i) for each preference profile, each equal-division constrained Walrasian allocation is an equilibrium allocation; (ii) conversely, each equilibrium allocation is equal-division constrained Walrasian. (iii) Furthermore, we show that if normality of goods is dropped, then equilibrium allocations may not be efficient.

Keywords: equal-sacrifice rule; manipulation game; equal-division Walrasian solution. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-gth and nep-hpe
Date: 2009-08
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Journal Article: Let them cheat! (2012) Downloads
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