Maximal manipulation of envy-free solutions in economies with indivisible goods and money

Abstract

We consider the problem of the fair allocation of indivisible goods and money with non-quasi-linear preferences. The purpose of the present study is to examine strategic manipulation under envy-free solutions. We show that under a certain domain-richness condition, each individual obtains the welfare level of his “optimal” envy-free allocation by maximally manipulating the solutions. This maximal manipulation theorem is helpful in analyzing the set of Nash equilibrium allocations in the direct revelation games associated with a given envy-free solution: if an envy-free solution satisfies a mild condition, the set of Nash equilibrium allocations in its associated direct revelation game coincides with that of envy-free allocations.