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Fairness and efficiency for allocations with participation constraints

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  • Echenique, Federico
  • Miralles, Antonio
  • Zhang, Jun

Abstract

We propose a notion of fairness for allocation problems in which different agents may have different reservation utilities, stemming from different outside options, or property rights. Fairness is usually understood as the absence of envy, but this can be incompatible with reservation utilities. It is possible that Alice's envy of Bob's assignment cannot be remedied without violating Bob's participation constraint. Instead, we seek to rule out justified envy, defined as envy for which a remedy would not violate any agent's participation constraint. We show that fairness, meaning the absence of justified envy, can be achieved together with efficiency and individual rationality. We introduce a competitive equilibrium approach with price-dependent incomes obtaining the desired properties.

Suggested Citation

  • Echenique, Federico & Miralles, Antonio & Zhang, Jun, 2021. "Fairness and efficiency for allocations with participation constraints," Journal of Economic Theory, Elsevier, vol. 195(C).
  • Handle: RePEc:eee:jetheo:v:195:y:2021:i:c:s0022053121000910
    DOI: 10.1016/j.jet.2021.105274
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    Cited by:

    1. Balbuzanov, Ivan, 2022. "Constrained random matching," Journal of Economic Theory, Elsevier, vol. 203(C).
    2. Miralles, Antonio & Pycia, Marek, 2021. "Foundations of pseudomarkets: Walrasian equilibria for discrete resources," Journal of Economic Theory, Elsevier, vol. 196(C).
    3. Altuntaş, Açelya & Phan, William, 2022. "Trading probabilities along cycles," Journal of Mathematical Economics, Elsevier, vol. 100(C).
    4. 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.

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    More about this item

    Keywords

    Fairness; Justified envy; Efficiency; Participation constraint; Pseudo-market equilibrium;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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