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Published November 2021 | Supplemental Material + Submitted + Published
Journal Article Open

Constrained Pseudo-Market Equilibrium


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.

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.

Attached Files

Published - aer.20201769.pdf

Submitted - 1909.05986.pdf

Supplemental Material - 15506.zip


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Additional details

August 20, 2023
October 23, 2023