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Constrained Pseudo-Market Equilibrium

Author

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  • Federico Echenique
  • Antonio Miralles
  • Jun Zhang

Abstract

We propose a market solution to the problem of resource allocation subject to quantitative constraints, such as those imposed by considerations of diversity or geographical distribution. Constraints are "priced," and agents are charged to the extent that their purchases a ect the value (at equilibrium prices) of the relevant constraints. The result is a constrained-efficient market equilibrium outcome. The outcome is fair whenever the constraints do not single out individual agents, which happens, for example with geographical distribution constraints. In economies with endowments, moreover, our equilibrium outcomes are constrained efficient and approximately individually rational.

Suggested Citation

  • Federico Echenique & Antonio Miralles & Jun Zhang, 2020. "Constrained Pseudo-Market Equilibrium," Working Papers 1149, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1149
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    References listed on IDEAS

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    1. Yinghua He & Antonio Miralles & Marek Pycia & Jianye Yan, 2018. "A Pseudo-Market Approach to Allocation with Priorities," American Economic Journal: Microeconomics, American Economic Association, vol. 10(3), pages 272-314, August.
    2. Ehlers, Lars & Hafalir, Isa E. & Yenmez, M. Bumin & Yildirim, Muhammed A., 2014. "School choice with controlled choice constraints: Hard bounds versus soft bounds," Journal of Economic Theory, Elsevier, vol. 153(C), pages 648-683.
    3. He, Yinghua & Li, Sanxi & Yan, Jianye, 2015. "Evaluating assignment without transfers: A market perspective," Economics Letters, Elsevier, vol. 133(C), pages 40-44.
    4. Andreu Mas-Colell, 1992. "Equilibrium Theory with Possibly Satiated Preferences," Palgrave Macmillan Books, in: Mukul Majumdar (ed.), Equilibrium and Dynamics, chapter 9, pages 201-213, Palgrave Macmillan.
    5. Yuichiro Kamada & Fuhito Kojima, 2015. "Efficient Matching under Distributional Constraints: Theory and Applications," American Economic Review, American Economic Association, vol. 105(1), pages 67-99, January.
    6. Federico Echenique & M. Bumin Yenmez, 2015. "How to Control Controlled School Choice," American Economic Review, American Economic Association, vol. 105(8), pages 2679-2694, August.
    7. Alexander Westkamp, 2013. "An analysis of the German university admissions system," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(3), pages 561-589, August.
    8. Eric Budish, 2011. "The Combinatorial Assignment Problem: Approximate Competitive Equilibrium from Equal Incomes," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1061-1103.
    9. Eric Budish & Yeon-Koo Che & Fuhito Kojima & Paul Milgrom, 2013. "Designing Random Allocation Mechanisms: Theory and Applications," American Economic Review, American Economic Association, vol. 103(2), pages 585-623, April.
    10. Phuong Le, 2017. "Competitive equilibrium in the random assignment problem," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(4), pages 369-385, December.
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    Citations

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    Cited by:

    1. Aygün, Orhan & Turhan, Bertan, 2021. "How to De-reserve Reserves," ISU General Staff Papers 202103100800001123, Iowa State University, Department of Economics.
    2. Echenique, Federico & Miralles, Antonio & Zhang, Jun, 2023. "Balanced equilibrium in pseudo-markets with endowments," Games and Economic Behavior, Elsevier, vol. 141(C), pages 428-443.
    3. Orhan Aygün & Bertan Turhan, 2023. "How to De-Reserve Reserves: Admissions to Technical Colleges in India," Management Science, INFORMS, vol. 69(10), pages 6147-6164, October.
    4. Aygün, Orhan & Turhan, Bertan, 2021. "How to De-reserve Reserves," ISU General Staff Papers 202104130700001123, Iowa State University, Department of Economics.
    5. Aziz, Haris & Brandl, Florian, 2022. "The vigilant eating rule: A general approach for probabilistic economic design with constraints," Games and Economic Behavior, Elsevier, vol. 135(C), pages 168-187.
    6. Balbuzanov, Ivan, 2022. "Constrained random matching," Journal of Economic Theory, Elsevier, vol. 203(C).
    7. Xiang Han & Onur Kesten & M. Utku Ünver, 2021. "Blood Allocation with Replacement Donors: A Theory of Multi-unit Exchange with Compatibility-based Preferences," Boston College Working Papers in Economics 1038, Boston College Department of Economics.
    8. Fedor Sandomirskiy & Philip Ushchev, 2024. "The geometry of consumer preference aggregation," Papers 2405.06108, arXiv.org.
    9. Miralles, Antonio & Pycia, Marek, 2021. "Foundations of pseudomarkets: Walrasian equilibria for discrete resources," Journal of Economic Theory, Elsevier, vol. 196(C).

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    More about this item

    Keywords

    pricing constraints; general equilibrium; random assignments;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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