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On a Fundamental Property of Talman-Yang's Auction under Price Control

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  • Zaifu Yang
  • Dongmo Zhang
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    Abstract

    Recently Talman and Yang (2008) examined an assignment market under price control. In the market a number of heterogeneous items are to be sold to several bidders. Each bidder has a valuation on each item. The seller has a reservation price for every item. Meanwhile every item has a ceiling price imposed by a central planner. Due to price controls, there usually do not exist market-clearing prices. To deal with this allocation problem, Talman and Yang proposed a dynamic auction with rationing that always yields a constrained equilibrium. In this paper we establish that this dynamic auction can actually ï¬nd a core allocation in ï¬nite steps, resulting in a Pareto efficient outcome. A core allocation consists of an assignment of items and a supporting price vector for the assignment.

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    Bibliographic Info

    Paper provided by Department of Economics, University of York in its series Discussion Papers with number 13/06.

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    Date of creation: Feb 2013
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    Handle: RePEc:yor:yorken:13/06

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    Keywords: Ascending auction; multi-item auction; housing market; price control; Pareto efficiency; core.;

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    1. Dehez, Pierre & Dreze, Jacques H., 1984. "On supply-constrained equilibria," Journal of Economic Theory, Elsevier, vol. 33(1), pages 172-182, June.
    2. Talman, A.J.J. & Yang, Z.F., 2008. "A dynamic auction for differentiated items under price rigidity," Open Access publications from Tilburg University urn:nbn:nl:ui:12-384478, Tilburg University.
    3. Herings, P.J.J. & Talman, A.J.J. & Zang, Z., 1994. "The computation of a continuum of constrained equilibria," Discussion Paper 1994-38, Tilburg University, Center for Economic Research.
    4. Herings,P. Jean-Jacques & Konovalov,Alexander, 2002. "Constrained Suboptimality when Prices Are Non-competitive," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    5. Tommy Andersson & Lars‐Gunnar Svensson, 2014. "Non‐Manipulable House Allocation With Rent Control," Econometrica, Econometric Society, vol. 82(2), pages 507-539, 03.
    6. Weddepohl, Claus, 1987. "Supply-constrained equilibria in economies with indexed prices," Journal of Economic Theory, Elsevier, vol. 43(2), pages 203-222, December.
    7. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-72, August.
    8. Kurz, Mordecai, 1982. "Unemployment equilibrium in an economy with linked prices," Journal of Economic Theory, Elsevier, vol. 26(1), pages 100-123, February.
    9. Cox, Charles C, 1980. "The Enforcement of Public Price Controls," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 887-916, October.
    10. Richard Arnott, 1995. "Time for Revisionism on Rent Control?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 99-120, Winter.
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