Working Papers, Department of Economics, Lund University
Budget-Balance, Fairness and Minimal Manipulability
(), Lars-Gunnar Svensson
() and Lars Ehlers
Abstract: A common real-life problem is to fairly allocate a number
of indivisible objects and a fixed amount of money among a group of agents.
Fairness requires that each agent weakly prefers his consumption bundle to
any other agent’s bundle. In this context, fairness is incompatible with
budget-balance and non-manipulability (Green and Laffont, 1979). Our
approach here is to weaken or abandon non-manipulability. We search for the
rules which are minimally manipulable among all fair and budgetbalanced
rules. First, we show for a given preference profile, all fair and
budgetbalanced rules are either (all) manipulable or (all) non-manipulable.
Hence, measures based on counting profiles where a rule is manipulable or
considering a possible inclusion of profiles where rules are manipulable do
not distinguish fair and budgetbalanced rules. Thus, a “finer” measure is
needed. Our new concept compares two rules with respect to their degree of
manipulability by counting for each profile the number of agents who can
manipulate the rule. Second, we show that maximally linked fair allocation
rules are the minimally (individually and coalitionally) manipulable fair
and budget-balanced allocation rules according to our new concept. Such
rules link any agent to the bundle of a pre-selected agent through a
sequence of indifferences.
Keywords: Minimal manipulability; fairness; budget-balance; allocation rules; (follow links to similar papers)
JEL-Codes: C71; C78; D63; D71; D78; (follow links to similar papers)
25 pages, November 26, 2010, Revised January 15, 2013
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