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Efficient Allocation of Indivisible Goods in Pseudomarkets with Constraints

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  • Faruk Gul
  • Wolfgang Pesendorfer
  • Mu Zhang

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.

Suggested Citation

  • Faruk Gul & Wolfgang Pesendorfer & Mu Zhang, 2024. "Efficient Allocation of Indivisible Goods in Pseudomarkets with Constraints," Journal of Political Economy, University of Chicago Press, vol. 132(11), pages 3708-3736.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/730561
    DOI: 10.1086/730561
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