Endogenous budget constraints in the assignment game

David  Cantala; Juan Sebastián  Pereyra

doi:10.3934/jdg.2015002

Article Contents

2015, Volume 2, Issue 3&4: 207-225. Doi: 10.3934/jdg.2015002

This issue Previous Article On Marilda Sotomayor's extraordinary contribution to matching theory Next Article A survey on assignment markets

Endogenous budget constraints in the assignment game

David Cantala^1, and
Juan Sebastián Pereyra^2,

1.
Centro de Estudios Económicos, El Colegio de México, Camino al Ajusco 20, Fuentes del Pedregal, 10740 Mexico City
2.
ECARES - Solvay Brussels School of Economics and Management, Université libre de Bruxelles and F.R.S.-FNRS, Ave. F.D. Roosevelt 42, B1050 - Brussels

Received: September 30, 2014

Revised: March 31, 2015

Published: June 2015

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Abstract

This paper studies economies with indivisible goods and budget-constrained 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.

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Mathematics Subject Classification: Primary: 91B68, 91A80; Secondary: 91B26.

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