We study economies with indivisibilities that satisfy the gross substitutes (GS) condition. The simplest example of GS preferences are unit demand preferences. We prove that the set of GS preferences is the largest set containing unit demand preferences for which the existence of Walrasian equilibrium is guaranteed. We show that if a GS economy is replicated sufficiently many times, the equilibrium payment of any agent in the Vickrey-Clarke-Groves mechanism is equal to the value of the allocation he receives at the smallest Walrasian prices. The model extended to include production. Journal of Economic Literature Classification Numbers: D4, D44, D5, D51.
ASJC Scopus subject areas
- Economics and Econometrics