Probabilistic assignment problem with multi-unit demands: A generalization of the serial rule and its characterization

We study a probabilistic assignment problem when agents have multi-unit demands for objects. We first introduce two fairness requirements to accommodate different demands across agents. We show that each of these requirements is incompatible with stochastic dominance efficiency (henceforth, we use the prefix “sd” for stochastic dominance) and weak sd-strategy-proofness, unless all agents have unitary demands. We next introduce a new incentive requirement which we call limited invariance. We explore implications of these requirements in combination of consistency or converse consistency.Our main result is that the generalized serial rule, which we propose as an adaptation of the serial rule to our setting, is the only rule satisfying sd-efficiency, the sd proportional-division lower-bound, limited invariance, and consistency. Uniqueness persists if we replace the sd proportional-division lower-bound by sd normalized-no-envy, or consistency by converse consistency, or both. The serial rule in Bogomolnaia and Moulin (2001) is characterized as a special case of our generalized serial rule.     

Lessons from a century of FED policy: Why monetary and credit policies need rules and boundaries

Wide operational and financial independence given to monetary and credit policies subjects the Federal Reserve to incentives detrimental for macroeconomic and financial stability. The absence of a monetary policy rule created go-stop incentives that produced inefficient volatility of both inflation and unemployment during the Great Inflation. Fed credit policy has undergone massive “mission creep” since the Fed was established. Being debt-financed fiscal policy, Fed credit policy beyond ordinary temporary lending to solvent depositories creates friction with the fiscal authorities and jeopardizes the Fed׳s independence. An ambiguous boundary of expansive Fed credit policy creates expectations of Fed accommodation in financial crisis—that blunts the incentive of private entities to take protective measures beforehand (to shrink counter-party risk and reliance on short-term finance, and build up equity capital) and blunts the incentive of the fiscal authorities to prepare procedures in advance to act systematically in times of credit turmoil. These points are illustrated with reference to the 2007–09 financial crisis. Part of the problem is that the independent Fed does not have the same incentive as the 19th century Bank of England to follow Bagehot׳s Rule. The paper concludes with a set of principles to preserve a workable, sustainable division of responsibilities between the independent central bank and the fiscal authorities.