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Competitive Equilibrium in the Random Assignment Problem

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  • Le, Phuong

Abstract

This paper studies the problem of random assignment with fractional endowments. In the random assignment problem, a number of objects has to be assigned to a number of agents. Though the objects are indivisible, an assignment can be probabilistic: it can give an agent some probability of getting an object. Fractional endowments complicate the matter 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.

Suggested Citation

  • Le, Phuong, 2013. "Competitive Equilibrium in the Random Assignment Problem," MPRA Paper 66290, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:66290
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    References listed on IDEAS

    as
    1. Stergios Athanassoglou & Jay Sethuraman, 2011. "House allocation with fractional endowments," International Journal of Game Theory, Springer;Game Theory Society, vol. 40(3), pages 481-513, August.
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    More about this item

    Keywords

    Random Assignment; Competitive Equilibrium; Mechanism Design;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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