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 .
We propose a pseudo-market solution to resource allocation problems subject to constraints . Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in course allocation; and other forms of constraints needed to model, for example, the market for roommates, and combinatorial assignment problems . Constraints give rise to pecuniary externalities, which are internalized via prices. Agents pay to the extent that their purchases affect the value of relevant constraints at equilibrium prices . The result is a constrained efficient market equilibrium outcome. The outcome is fair whenever the constraints do not single out individual agents . Our result can be extended to economies with endowments, and address participation constraints .
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market solution to the problem of resource allocation
pseudo-market solution to resource allocation problems
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, such as
. Our treatment of constraints is general: including bihierarchical constraints due to
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or geographical distribution
in school choice, or scheduling in course allocation; and other forms of constraints needed to model, for example, the market for roommates, and combinatorial assignment problems
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(at equilibrium prices) of the relevant constraints
of relevant constraints at equilibrium prices
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constrained-efficient
constrained efficient
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, which happens, for example with geographical distribution constraints. In
. Our result can be extended to
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moreover, we can
and
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. Our equilibrium outcomes are then constrained efficient and approximately individually rational