Lottery Equilibrium

36 Pages Posted: 25 Apr 2018

Date Written: April 6, 2018

Abstract

Absent convex preferences or in the presence of indivisibilities, many classical results in general equilibrium fail. We provide a simple solution in a continuum economy: allow traders to engage in simple lotteries between two wealth levels. Such lottery equilibria approximately clear finite economies, with the approximation improving as the economy grows large. Our results generalize those in macroeconomics while suggesting more efficient designs for assignment without transfers and auction markets with budget constraints and may have implications for social policy and the theory of fair allocations.

Keywords: lotteries, non-convex preferences, indivisibilities, existence of equilibrium

JEL Classification: C62, D41, D47, D51, D63

Suggested Citation

Mollner, Joshua and Weyl, Eric Glen, Lottery Equilibrium (April 6, 2018). Available at SSRN: https://ssrn.com/abstract=3157918 or http://dx.doi.org/10.2139/ssrn.3157918

Joshua Mollner (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

Eric Glen Weyl

Microsoft ( email )

306 Park Ave
Apt 3
Hoboken, NJ 07030
United States
8579984513 (Phone)

HOME PAGE: http://www.glenweyl.com

RadicalxChange Foundation ( email )

HOME PAGE: http://www.radicalxchange.org

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