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(Near) Substitute Preferences and Equilibria with Indivisibilities

Author

Listed:
  • Thành Nguyen

    (Purdue University)

  • Rakesh Vohra

    (University of Pennsylvania)

Abstract

An obstacle to using market mechanisms to allocate indivisible goods is the non-existence of competitive equilibria (CE). To surmount this Arrow and Hahn proposed the notion of social-approximate equilibria: a price vector and corresponding excess demands that are ‘small’. We identify social approximate equilibria where the excess demand, good-by-good, is bounded by a parameter that depends on preferences only and not the size of the economy. This parameter measures the degree of departure from substitute preferences. As a special case, we identify a class called geometric substitutes that guarantees the existence of competitive equilibria in non-quasi-linear settings. It strictly generalizes prior conditions such as single improvement, no complementarities, gross substitutes and net substitutes.

Suggested Citation

  • Thành Nguyen & Rakesh Vohra, 2022. "(Near) Substitute Preferences and Equilibria with Indivisibilities," PIER Working Paper Archive 22-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:22-010
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    Citations

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    Cited by:

    1. Ahmadzadeh, Amirreza & Kamali-Shahdadi, Behrang, 2023. "Matching Unskilled/Skilled Workers to Firms Facing Budget Constraints," TSE Working Papers 23-1446, Toulouse School of Economics (TSE).
    2. Jacob K Goeree, 2023. "Yquilibrium: A Theory for (Non-) Convex Economies," Papers 2305.06256, arXiv.org.

    More about this item

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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