Econometrica: Sep 2019, Volume 87, Issue 5
Endowments, Exclusion, and Exchange
Ivan Balbuzanov, Maciej H. Kotowski
We propose a new solution for discrete exchange economies and resource‐allocation problems, the exclusion core. The exclusion core rests upon a foundational idea in the legal understanding of property, the right to exclude others. By reinterpreting endowments as a distribution of exclusion rights, rather than as bundles of goods, our analysis extends to economies with qualified property rights, joint ownership, and social hierarchies. The exclusion core is characterized by a generalized top trading cycle algorithm in a large class of economies, including those featuring private, public, and mixed ownership. It is neither weaker nor stronger than the strong core.
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