Econometrica: Sep, 2019, Volume 87, Issue 5

Endowments, Exclusion, and Exchange

https://doi.org/10.3982/ECTA15676
p. 1663-1692

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.