Fair and Truthful Mechanism with Limited Subsidy

Abstract: The notion of \emph{envy-freeness} is a natural and intuitive fairness requirement in resource allocation. With indivisible goods, such fair allocations are unfortunately not guaranteed to exist. Classical works have avoided this issue by introducing an additional divisible resource, i.e., money, to subsidize envious agents. In this paper, we aim to design a truthful allocation mechanism of indivisible goods to achieve both fairness and efficiency criteria with a limited amount of subsidy. Following the work of Halpern and Shah, our central question is as follows: to what extent do we need to rely on the power of money to accomplish these objectives? For general valuations, the impossibility theorem of combinatorial auction translates to our setting: even if an arbitrarily large amount of money is available for use, no mechanism can achieve truthfulness, envy-freeness, and utilitarian optimality simultaneously when agents have general monotone submodular valuations. By contrast, we show that, when agents have matroidal valuations, there is a truthful allocation mechanism that achieves envy-freeness and utilitarian optimality by subsidizing each agent with at most $1$, the maximum marginal contribution of each item for each agent. The design of the mechanism rests crucially on the underlying matroidal M-convexity of the Lorenz dominating allocations.