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Title: Foundations of Pseudomarkets: Walrasian Equilibria for Discrete Resources

Author(s): Antonio Miralles and Marek Pycia

Publication Date: August 2020


Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Miralles, A and Pycia, M. 2020. 'Foundations of Pseudomarkets: Walrasian Equilibria for Discrete Resources'. London, Centre for Economic Policy Research.