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The Revealed Preference Theory of Aggregate Object Allocations

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  • Umutcan Salman

Abstract

I develop a revealed preference framework to test whether an aggregate allocation of indivisible objects satisfies Pareto efficiency and individual rationality (PI) without observing individual preferences. Exploiting the type-based preferences of Echenique et. al. (2013), I derive necessary and sufficient conditions for PI-rationalizability. I show that an allocation is PI-rationalizable if and only if its allocation graph is acyclic. Next, I analyse non-PI-rationalizable allocations. First, I study the three respective problems: removal of a minimum size of subset of individuals/types/objects to restore PI-rationalizability. I prove that these three problems are NP-complete. Then, I provide an alternative goodness-of-fit measure, namely Critical Exchange Index (CEI). The CEI assess the highest portion of individuals who can involve exchanging their final objects to reach PI. This measure shows the extent of inefficiencies. The results yield the first complete revealed preference analysis for Pareto efficiency and individual rationality in matching markets and provide an implementable tool for empirical applications.

Suggested Citation

  • Umutcan Salman, 2025. "The Revealed Preference Theory of Aggregate Object Allocations," Papers 2512.23352, arXiv.org.
    • Handle: RePEc:arx:papers:2512.23352
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    References listed on IDEAS

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    5. Federico Echenique & Sangmok Lee & Matthew Shum, 2011. "The Money Pump as a Measure of Revealed Preference Violations," Journal of Political Economy, University of Chicago Press, vol. 119(6), pages 1201-1223.
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    8. Federico Echenique & Sangmok Lee & Matthew Shum & M. Bumin Yenmez, 2013. "The Revealed Preference Theory of Stable and Extremal Stable Matchings," Econometrica, Econometric Society, vol. 81(1), pages 153-171, January.
    9. Echenique,Federico & Immorlica,Nicole & Vazirani,Vijay V. (ed.), 2023. "Online and Matching-Based Market Design," Cambridge Books, Cambridge University Press, number 9781108831994, November.
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