We will study untypical markets, where scare ressources have to be allocated.

Standard equilibrium are either not applicable or are undesirable.

In the markets we will study, money is not exchanged because it is illegal or viewed as
undesirable, unethical, or unfair.

I. Equity and priority

We are looking for a methods which can be used to allocated on indivisible

commodities
It depends on the context : if both participants are similar, then both methods are
efficient as they identify the agents who value the good the most and we assule that
agents who value the good most will be willing to spend more ressorcesbto obtain them

However, if means are unequal, then auctions can be considered more efficient because
no time waiting will be wasted and revenue will be raised
General principles

The general principle in priority allocation is to allocate points to claimants and give the
indivisible good to the one with de most points. The points are to be allocated based on
a claimant's observable characteristics that are summarised in his type. A claimant's
type is often multidimensional like in the kidney or demobilisation examples.
The key property that characterises those priorities methods that can be derived from a
point system is a property of separability in the effect to the different attributes that
define a claimant's type

Aggregation of opinions is a typical example of a point system's that are based ont he
opinions or preference of various parties.
Borda and Condorcet point system
Arrow’s impossibility theorem

It can be very hard to define the point system because it can lead to some complex
issues. It is often not clear how to reach a consensus, especially when voting. Arrow’s
impossibility theorem states that no method that aggregates
individual rankings into a single consensus ordering satisfies all of the below:

Aristotle’s principle of Distributive Justice

Equals should be treated equally and unequals unequally, in proportion to the relevant
similarities and differences
 Inequality based on wealth, land ownership, or literacy are justified by fitness and reward.
The strict equality of political rights is an exogenous right
The limit age and the denial of voting right to the insane are two fitness arguments.

II. Fair distribution

 III - Case of an excess :

1 - Proportional Solution - PS

2 - Equal Surplus Solution - ESL

3 - Uniform Gains Solution

 IV - Case of a deficit :

1 - Proportional Solution - PS

2 - Uniform Losses Solutions - ULS

3- Uniform Gains Solution - UGS

General steps for Uniform Losses

1 - equalize losses by calculating :

2- Find all agents who get

3 - Give 0 to these agents

4 - Reapeat the procedure for the remaining agents
(M example 2.5)
General steps of Uniform Gains solution :
Graphical representation
Other incentives in Fair Distribution

Maimonides rule : "Give an equal amoun to every claimant or the full amount of his
claim, whichever is smaller

Collusion proofness

If we cannot check the size of a claim, then the Proportional rule is manipulable by
over standing claims

A claims allocation rule is collusion-proof if consolidating the claims of several individuals

into a claim does not change the total amount that these claimant's receive

Impartiality means that the allocation depends only on the individuals claims and the
total amount to be distributed.
The allocation cannot depend ont the agents identities

But one could also benefit from not changing the size, but by changing the number of
agents that file the claims
1 - Proportional Solution

a - Is Merging beneficial ?

b - Is Splitting beneficial ?
2 - Equal surplus solution

a - Is Merging bad ?
b - Is Splitting good ?

3- Uniform Losses Solution

a - Is Merging good ?
b - Is Splitting bad ?
 In conclusion, the agents will often try to influence positively the amount they
will get allocated. They can do this even if they cannot manipulate their claim xi.
They can merge their claim with the one of another agent (x'i = xi + xj) or they
can split their claim and give a part of it to a third person (xi = xi1 + xi2). It works
differently in the different allocation solutions :

Equal surplus solution/ Uniform

Proportional Solution Losses solution

If excess

Uniform Gains Solution If deficit

 Strategy-proofness

It is a non-manipulability property. Given the amount t to be divided and given the other
agent's claims, if an agent don't nefit from reporting another claim instead of his true
claim, the solution is strategy-proof

4- Contested Garment Solution - CGS

Two hold a garment, one claims it all, the other claims half.
One will get 3/4, the other 1/4

One concedes half of the garment to the other (no conflict)

They both claim the other half and split it equally
Graphical Representation of Contested Garment
How does the CGS look like when the estate change

t is small

t is large

Graphically, we can see that the commodity is split equally until the half point (xi/2) of the
agent that claimed less. Similarly, the loss is shared until the half point of the agents that
claimed less.
In the beginning, neither agent makes any concessions, so the commodity is shared equally
(yi = t/2).
Then, as we enter the horizontal part (that could also be vertical is x2 > x1), agent 2 makes
concessions to agent 1 that become bigger , without agent 1 making any concessions.
Finally, agent 1 also starts to make concessions and the Contested part of the commodity is
shared equally.
We can also see that the solution is symmetric around the half-claim point, which is where
each agents gets half of their claim

Solution can be generalise to any number of agents and is self-dual, which means that it
divides a deficit exactly as it divides a gain
Example :
a - Duality
Example self duality
 5 - Run to the bank

Whoever makes his claim first, gets his full claim if the commodity is large enough. The
second one can have thees, but not mor than his claim.
We don't know who gets the claim first, which mean that agent 1 and 2 have an equal
chance of claiming first.

Example: