Balancing supply and demand under bilateral constraints

Olivier Bochet, Rahmi Ilkiliç, Hervé Moulin, Jay Sethuraman

Research output: Contribution to journalArticlepeer-review

Abstract

In a moneyless market, a nondisposable homogeneous commodity is reallocated between agents with single-peaked preferences. Agents are either suppliers or demanders. Transfers between a supplier and a demander are feasible only if they are linked. The links form an arbitrary bipartite graph. Typically, supply is short in one segment of the market, while demand is short in another. Our egalitarian transfer solution generalizes Sprumont's (1991) and Klaus et al.'s (1998) uniform allocation rules. It rations only the long side in each market segment, equalizing the net transfers of rationed agents as much as permitted by the bilateral constraints. It elicits a truthful report of both preferences and links: removing a feasible link is never profitable to either one of its two agents. Together with efficiency and a version of equal treatment of equals, these properties are characteristic.

Original languageEnglish (US)
Pages (from-to)395-423
Number of pages29
JournalTheoretical Economics
Volume7
Issue number3
DOIs
StatePublished - Sep 2012

Keywords

  • Bilateral trade
  • Bipartite graph
  • Equal treatment of equals
  • Single-peaked preferences
  • Strategy-proofness

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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