Working Paper: CEPR ID: DP15161
Authors: Antonio Miralles; Marek Pycia
Abstract: We study the assignment of objects in environments without transfers allowing for single-unit and general multi-unit demands, and any linear constraints, thus covering a wide range of applied environments, from school choice to course allocation. We establish the Second Welfare Theorem for these environments despite them failing the local non-satiation condition that previous studies of the Second Welfare Theorem relied on. We also prove a strong version of the First Welfare Theorem. We thus show that the link between efficiency and decentralization through prices is valid in environments without transfers, and hence provide a foundation for pseudomarket- based market design by showing that the restriction to such mechanisms is without loss of generality.
Keywords: Market Design; Pseudomarkets; Walrasian Equilibrium; Efficiency; Assignment Problems
JEL Codes: D61; D63; D71
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| efficient assignments (D61) | Walrasian equilibrium (D50) |
| Walrasian equilibrium (D50) | efficiency of assignments (D61) |
| strong efficiency (G14) | second welfare theorem (D69) |
| second welfare theorem (D69) | efficient assignments (D61) |
| absence of transfers (F16) | efficiency and decentralization through prices (D61) |
| discreteness of resources (Q30) | efficiency and decentralization through prices (D61) |