Competitive Equilibrium with Indivisible Goods and Generic Budgets

Abstract

Competitive equilibrium from equal incomes (CEEI) is a classic solution to the problem of fair and efficient allocation of goods [Foley'67, Varian'74]. Every agent receives an equal budget of artificial currency with which to purchase goods, and prices match demand and supply. However, a CEEI is not guaranteed to exist when the goods are indivisible, even in the simple two-agent, single-item market. Yet, it is easy to see that once the two budgets are slightly perturbed (made generic), a competitive equilibrium does exist. In this paper we aim to extend this approach beyond the single-item case, and study the existence of equilibria in markets with two agents and additive preferences over multiple items. We show that for agents with equal budgets, making the budgets generic -- by adding vanishingly small random perturbations -- ensures the existence of an equilibrium. We further consider agents with arbitrary non-equal budgets, representing non-equal entitlements for goods. We show that competitive equilibrium guarantees a new notion of fairness among non-equal agents, and that it exists in cases of interest (like when the agents have identical preferences) if budgets are perturbed. Our results open opportunities for future research on generic equilibrium existence and fair treatment of non-equals.