Sequential Pseudomarkets: Welfare Economics in Random Assignment Economies

We study random assignment economies with expected-utility agents, each of them eventually obtaining a single object. Inspired on Hylland and Zeckhauser’s (1979) Pseudomarket mechanism (PM) and on a serial dictatorship, we introduce the Sequential Pseudomarket (SP) where groups of agents are called turn by turn and participate in a pseudomarket for the remaining objects. To measure efficiency, we focus on the set of ex-ante Pareto-optimal (PO) random assignments and on the ex-ante weak core (CO). We find: 1) PM ⊂ PO but the converse is not always true (there is no Second Theorem of Welfare Economics), 2) PO ⊂ SP but the converse is not always true, 3) SP ⊂ CO