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One-Sided Markets with Externalities

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Abstract

We study the problem of allocating indivisible objects to a set of rational players where each player’s final utility depends on the intrinsic valuation of the allocated item as well as the allocation within the player’s local neighbourhood. We specify players’ local neighbourhood in terms of a weighted graph. This extends the model of one-sided markets to incorporate neighbourhood externalities. We consider the solution concept of stability and show that, unlike in the case of one-sided markets, stable allocations may not always exist. When the underlying local neighbourhood graph is symmetric, a 2-stable allocation is guaranteed to exist and any decentralised mechanism where pairs of rational players agree to exchange objects terminates in such an allocation. We show that computing a 2-stable allocation is PLS-complete and further identify tractable subclasses. In the case of asymmetric neighbourhood structures, we show that it is NP-complete to check if a k-stable allocation exists for every fixed k. We then identify structural restrictions where stable allocations always exist and can be computed efficiently. Finally, we study the notion of envy-freeness in this framework.

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Acknowledgements

We thank the reviewers for their detailed comments which helped improve the presentation of the paper. Sunil Simon was partially supported by the grant CRG/2022/006140.

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  1. Department of CSE, IIT Kanpur, Kanpur, India

    Sagar Massand & Sunil Simon

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  1. Sagar Massand
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Massand, S., Simon, S. One-Sided Markets with Externalities. Theory Comput Syst 69, 3 (2025). https://doi.org/10.1007/s00224-024-10210-x

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