Echenique, Federico and Miralles, Antonio and Zhang, Jun (2021) Constrained Pseudo-Market Equilibrium. American Economic Review, 111 (11). pp. 3699-3732. ISSN 0002-8282. doi:10.1257/aer.20201769. https://resolver.caltech.edu/CaltechAUTHORS:20210304-093802203
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Abstract
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in course allocation; and other forms of constraints needed to model, for example, the market for roommates, combinatorial assignment problems, and knapsack constraints. Constraints give rise to pecuniary externalities, which are internalized via prices. Agents pay to the extent that their purchases affect the value the of relevant constraints at equilibrium prices. The result is a constrained-efficient market-equilibrium outcome. The outcome is fair to the extent that constraints treat agents symmetrically.
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| Additional Information: | © 2021 American Economic Association. Jeffrey Ely was the coeditor for this article. We thank Eric Budish, Fuhito Kojima, Andy McLennan, Hervé Moulin, and Tayfun Sönmez for comments. Echenique thanks the National Science Foundation for its support through the grants SES-1558757 and CNS-1518941, and the Simons Institute at UC Berkeley for its hospitality while part of the paper was written. Miralles acknowledges financial support from the Spanish Agencia Estatal de Investigación (AEI), through the Severo Ochoa Programme for Centres of Excellence in R&D (Barcelona School of Economics CEX2019-000915-S). Zhang acknowledges financial support from National Natural Science Foundation of China (Grant 72122009 and 72033004). Echenique, Miralles, and Zhang are co-first authors. | ||||||||||||||
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| Issue or Number: | 11 | ||||||||||||||
| Classification Code: | JEL: D47, D61, D63, I11, I21 | ||||||||||||||
| DOI: | 10.1257/aer.20201769 | ||||||||||||||
| Record Number: | CaltechAUTHORS:20210304-093802203 | ||||||||||||||
| Persistent URL: | https://resolver.caltech.edu/CaltechAUTHORS:20210304-093802203 | ||||||||||||||
| Official Citation: | Echenique, Federico, Antonio Miralles, and Jun Zhang. 2021. "Constrained Pseudo-Market Equilibrium." American Economic Review, 111 (11): 3699-3732; DOI: 10.1257/aer.20201769 | ||||||||||||||
| Usage Policy: | No commercial reproduction, distribution, display or performance rights in this work are provided. | ||||||||||||||
| ID Code: | 108307 | ||||||||||||||
| Collection: | CaltechAUTHORS | ||||||||||||||
| Deposited By: | Tony Diaz | ||||||||||||||
| Deposited On: | 04 Mar 2021 21:36 | ||||||||||||||
| Last Modified: | 23 Nov 2021 21:51 |
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