Equilibrium in quality markets, beyond the transferable case
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We consider the market for an indivisible quality good, in the tradition of standard hedonic equilibrium theory but replacing the commonly used quasi-linear assumption on consumers’ preferences by a more realistic nonlinear budget constraint. Taking advantage of quasi-linearity on the producer’s side, we prove that an optimal transport-like argument can still be used to derive existence of equilibria. We also discuss some simple one-dimensional examples.
KeywordsQuality markets Equilibrium Optimal transport Nontransferable models
JEL ClassificationC62 C78
The authors are grateful to Alfred Galichon for many fruitful discussions. G.C. acknowledges the support of the Agence Nationale de la Recherche through the projects ISOTACE and MAGA.
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