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Competitive equilibrium in the random assignment problem
Author(s) -
Le Phuong
Publication year - 2017
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12135
Subject(s) - competitive equilibrium , economics , endowment , mathematical economics , incentive compatibility , random assignment , exchange economy , assignment problem , microeconomics , pareto principle , pareto optimal , mechanism (biology) , incentive , mathematical optimization , mathematics , multi objective optimization , operations management , philosophy , statistics , epistemology
This paper studies the problem of random assignment with fractional endowments. Fractional endowments complicate matters because the assignment has to make an agent weakly better off than his endowment. I first formulate an exchange economy that resembles the random assignment problem and prove the existence of competitive equilibrium in this economy. I then propose a pseudo‐market mechanism for the random assignment problem that is based on the competitive equilibrium. This mechanism is individually rational, Pareto optimal and justified envy‐free but not incentive compatible.