This paper benefited from the comments of seminar participants at CORE, the universities of Edinburgh, St Andrews, Venice, Warwick, Pompeu Fabra, and the London Business School. Special thanks to Anna Bogomolnaia, Matt Jackson, Bettina Klaus, Jeremy Laurent-Lucchetti, and Karl Schlag for stimulating discussions, and to the Editor and referees of this journal for constructive criticisms. Olivier Bochet's research is supported by the Swiss National Fund (SNF) under Grant 100014-126954. Rahmi İlkılıç acknowledges the support of the European Community via Marie Curie Grant PIEF-GA-2008-220181. Moulin's research was supported by MOVE at the Universitat Autònoma de Barcelona. Sethuraman's research was supported by NSF under Grant CMMI-0916453.
Balancing supply and demand under bilateral constraints
Article first published online: 3 OCT 2012
Copyright © 2012 Olivier Bochet, Rahmi İlkılıç, Hervé Moulin, and Jay Sethuraman
Volume 7, Issue 3, pages 395–423, September 2012
How to Cite
Bochet, O., İlkılıç, R., Moulin, H. and Sethuraman, J. (2012), Balancing supply and demand under bilateral constraints. Theoretical Economics, 7: 395–423. doi: 10.3982/TE893
- Issue published online: 3 OCT 2012
- Article first published online: 3 OCT 2012
- Submitted 2010-11-2. Final version accepted 2011-7-27. Available online 2011-7-27.
- Bipartite graph;
- bilateral trade;
- equal treatment of equals;
- single-peaked preferences
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.