Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2004:8: Strategy-Proof and Fair Wages

Lars-Gunnar Svensson ()
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Lars-Gunnar Svensson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: A fair division problem with indivisible objects, e.g. jobs, and one divisible good (money) is considered. The individuals consume one object and money. The class of strategy-proof and fair allocation rules is characterized. The allocation rules in the class are like a Vickrey auction bossy and like the Clark-Groves mechanisms in general not "budget balanced". The efficiency loss due to fairness and strategy-proofness becomes measurable in monetary terms. Two interpretations of the formal model is discussed. First, it is a situation where a given sum of money has to be distributed as wages and fair wages are to be implemented. Second, it is as an auction model where a number of objects are simultaneously traded.

Keywords: ndivisibilities; fairness; strategy-proofness; wages; Vickrey-auction

JEL-codes: C68; C71; C78; D61; D63; D71; D78

21 pages, March 9, 2004

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