TRADE-OFF BETWEEN EQUITY AND EFFICIENCY IN A GENERAL ECONOMY WITH INDIVISIBLE GOODS

In most of the recent literature on fair allocation in economies with indivisible goods and a single infinitely divisible good, it is assume d that each agent can consume at most one indivisible good. In this pa per, we show that if this assumption is dropped, there do not necessar ily exist envy-free and Pareto efficient allocations. However, envy-fr ee allocations still exist and so do pareto efficient allocations. Hen ce, a trade-off between equity and efficiency arises.