Existence, uniqueness and efficiency of equilibrium in hedonic markets with multidimenstional types

TL;DR

This paper analyzes equilibrium existence, uniqueness, and efficiency in multidimensional hedonic markets with indivisible goods, considering both discrete and continuous agent types and utility functions.

Contribution

It establishes conditions for the existence, uniqueness, and efficiency of equilibrium in complex multidimensional hedonic markets, extending previous models.

Findings

Equilibria exist under broad conditions.

Equilibrium prices and distributions are often unique.

Equilibria are proven to be efficient.

Abstract

We study equilibrium in hedonic markets, when consumers and suppliers have reservation utilities, and the utility functions are separable with respect to price. There is one indivisible good, which comes in different qualities; each consumer buys 0 or 1 unit, and each supplier sells 0 or 1 unit. Consumer types, supplier types and qualities can be either discrete of continuous, in which case they are allowed to be multidimensional. Prices play a double role: they keep some agents out of the market, and they match the remaining ones pairwise. We define equilibrium prices and equilibrium distributions, and we prove that equilibria exist, we investigate to what extend equilibrium prices and distributions are unique, and we prove that equilibria are efficient. In the particular case when there is a continuum of types, and a generalized Spence-Mirrlees condition is satisfied, we prove the existence of a pure equilibrium, where demand distributions are in fact demand functions, and we show to what extent it is unique. The proofs rely on convex analysis, and care has been given to illustrate the theory with examples.