Elsevier

Journal of Economic Theory

Volume 196, September 2021, 105303
Journal of Economic Theory

Foundations of pseudomarkets: Walrasian equilibria for discrete resources☆

https://doi.org/10.1016/j.jet.2021.105303Get rights and content
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Abstract

We study the assignment of discrete resources in a general model encompassing a wide range of applied environments, such as school choice, course allocation, and refugee resettlement. We allow single-unit and general multi-unit demands and any linear constraints. We prove the Second Welfare Theorem for these environments and a strong version of the First Welfare Theorem. In this way, we establish an equivalence between strong efficiency and decentralization through prices in discrete environments. Showing that all strongly efficient outcomes can be implemented through pseudomarkets, we provide a foundation for using pseudomarkets in market design.

JEL classification

D47
D50
D60

Keywords

Random assignment
Pseudomarkets
Welfare theorems
Walrasian equilibrium
Discrete markets
Multi-unit demand
Single-unit demand
Complementarities
Constraints

Cited by (0)

☆

From 2014 till 2019 this paper was posted and presented under the title “Prices and Efficient Assignments Without Transfers” (first presentation: May 2014, first posted draft: October 2014; substantial revision: February 2017). We would like to thank Salvador Barbera, Roland Benabou, Dirk Bergemann, Simon Board, Sergiu Hart, Andrew McLennan, Andreu Mas-Colell, Jordi Massó, Moritz Meyer-ter-Vehn, Alessandro Pavan, Michael Richter, William Thomson, Utku Unver, Rakesh Vohra, William Zame, Juan Enrique Martínez-Legaz and audiences at UCLA, UAB, SAET 2015, and U Zurich for helpful comments, and Tuomas Kari, Julian Teichgräber, and Simpson Zhang for excellent research assistance. Miralles gratefully acknowledges the hospitality of Ortygia Business School, UCLA, and Carnegie Mellon University, where most of the work has been undertaken, as well as the financial support from the Spanish Governments (SEV-2015-0563, ECO2017-83534P) and the Catalan Government (SGR2017 0711). Pycia gratefully acknowledges the support of UCLA, where he was a faculty member when working on this paper, as well as the support from the William S. Dietrich II Economic Theory Center at Princeton University.

© 2021 The Authors. Published by Elsevier Inc.