Ulric B. and Evelyn L. Bray Social Sciences Seminar

Wednesday September 30, 2020 12:00 PM

Constrained pseudo-market equilibrium

Speaker: Federico Echenique, Division of the Humanities and Social Sciences, Caltech
Location: Online Event

Abstract: We propose a market solution to the problem of resource allocation subject to constraints, such as considerations of diversity or geographical distribution. Constraints give rise to pecuniary externalities, which are internalized via prices. Agents pay to the extent that their purchases affect the value (at equilibrium prices) of the relevant constraints. The result is a constrained-efficient market equilibrium outcome. The outcome is fair whenever the constraints do not single out individual agents, which happens, for example with geographical distribution constraints. In economies with endowments, moreover, we can address participation constraints. Our equilibrium outcomes are then constrained efficient and approximately individually rational.

Written with Antonio Miralles and Jun Zhang.

How to view the seminar:
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Series Ulric B. and Evelyn L. Bray Social Sciences Seminar Series

Contact: Letty Diaz at 626-395-1255 letty.diaz@caltech.edu