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Ulric B. and Evelyn L. Bray Social Sciences Seminar

Wednesday, September 30, 2020
12:00pm to 1:00pm
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Constrained pseudo-market equilibrium
Federico Echenique, Allen and Lenabelle Davis Professor of Economics, Division of the Humanities and Social Sciences, Caltech,

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:
Sign up for a free twitch.tv account, and tune in on Wednesdays at noon pacific time on twitch.tv/caltechecontheory. You will be able to ask questions on the twitch chat.

For more information, please contact Letty Diaz by phone at 626-395-1255 or by email at letty.diaz@caltech.edu.