Journal article

Two-sided allocation problems, decomposability, and the impossibility of efficient trade

D Delacrétaz, S Loertscher, LM Marx, T Wilkening

Journal of Economic Theory | Elsevier | Published : 2019


Previous literature has shown that private information is a transaction cost that prevents efficient reallocation in two-sided setups with bilateral trade or homogeneous goods. We derive conditions under which the impossibility of efficient trade extends to rich environments in which buyers and sellers have multi-dimensional private types, accommodating many-to-many trades and heterogeneous objects. If agents can be decomposed into unit constituents, the allocation problem can be represented as an assignment game and impossibility obtains through a generalization of Shapley's (1962) result that buyers and sellers are complements. We introduce a general family of payoff functions that ensures..

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