Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2012:8: Least Manipulable Envy-free Rules in Economies with Indivisibilities

Tommy Andersson (), Lars Ehlers () and Lars-Gunnar Svensson ()
Additional contact information
Tommy Andersson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Lars Ehlers: Université de Montréal, Postal: Département de sciences économiques and CIREQ, Université de Montréal, Montréal, Québec H3C 3J7, Canada
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: We consider envy-free and budget-balanced allocation rules for problems where a number of indivisible objects and a fixed amount of money is allocated among a group of agents. In "small" economies, we identify under classical preferences each agent's maximal gain from manipulation. Using this result we find the envy-free and budget-balanced allocation rules which are least manipulable for each preference profile in terms of any agent's maximal gain. If preferences are quasi-linear, then we can find an envy-free and budget-balanced allocation rule such that for any problem, the maximal utility gain from manipulation is equalized among all agents.

Keywords: (Least) Manipulability; Envy-freeness; Budget-Balance; Indivisibilities.

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

16 pages, First version: April 25, 2012. Revised: September 30, 2013.

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