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Endogenous budget constraints in the assignment game

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Listed:
  • David Cantala
  • Juan Sebastian Pereyra Barreiro

Abstract

This paper studies economies with indivisible goods and budgetconstrained agents with unit-demand who act as both sellers and buyers. In prior literature on the existence of competitive equilibrium, it is assumed the indispensability of money, which in turn implies that budgets constraints are irrelevant. We introduce a new condition, Money Scarcity (MS), that considers agents' budget constraints and ensures the existence of equilibrium. Moreover, an extended version of Gale's top trading cycles algorithm is presented, and it is shown that under MS this mechanism is strategy-proof. Finally, we prove that this mechanism is the unique mechanism that minimizes money transactions at equilibrium.

Suggested Citation

  • David Cantala & Juan Sebastian Pereyra Barreiro, 2015. "Endogenous budget constraints in the assignment game," ULB Institutional Repository 2013/282616, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/282616
    Note: SCOPUS: ar.j
    as

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