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Borrowing-proofness

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Abstract

We formulate and study the requirement on an allocation rule that no agent should be able to benefit by augmenting his endowment through borrowing resources from the outside world (alternatively, by simply exaggerating it). We show that the Walrasian rule is not "borrowing-proof" even on standard domains. More seriously, no efficient selection from the endowments-lower-bound correspondence, or from the no-envy-in-trades correspondence, or from the egalitarian-equivalent-in-trades correspondence is borrowing-proof. These impossibilities hold even on the domain of economies with homothetic preferences.

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  • William Thomson, 2009. "Borrowing-proofness," RCER Working Papers 545, University of Rochester - Center for Economic Research (RCER).
    • Handle: RePEc:roc:rocher:545
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