Competitive Equilibrium in Labor Economies through the Lens of Goods and Chores Fisher Markets

2026-06-12

AI Summary

This study addresses equilibrium in a two-sided labor market where users perceive tasks as goods while workers view them as burdens. To this end, it introduces a unified Fisher market model that simultaneously treats tasks as goods for users—maximizing utility under budget constraints—and as burdens for workers—minimizing disutility under income constraints. By leveraging KKT conditions and a variable substitution technique, the inherently non-convex problem is transformed into a linear program, enabling a rigorous proof of equilibrium existence and the validity of welfare theorems. For the case of linear preferences, the work further proposes a strongly polynomial-time combinatorial algorithm that efficiently solves linear programs with irrational coefficients, thereby overcoming longstanding challenges in constructing such LPs within traditional goods-market frameworks.

Abstract

In this paper, we study a two-sided labor market that couples the classical Fisher market with goods and the Fisher market with bads into a single unified framework. In our model, users demand tasks in order to derive utility, while workers supply labor to perform these tasks in exchange for earnings. Each task thus plays a dual role: it is a good for the user side of the market and a chore for the worker side. Given prices for tasks, users choose utility-maximizing bundles subject to budgets, while workers choose disutility-minimizing task bundles subject to earning requirements; the resulting choices induce demand and supply endogenously for each task, and a CE corresponds to prices at which these coincide. We show that such markets are guaranteed to admit a CE in a very general setting, and the first and second welfare theorems hold for our labor market model. We next study the computation of equilibria under linear preferences. We show that, similar to the chores setting, equilibria correspond to KKT points of an Eisenberg-Gale-like non-convex program. Despite the non-convex characterization, we go on to show a set of surprisingly positive results. First, we show that there exists a polynomial-time combinatorial algorithm for computing CE, which relies on a natural Walrasian scheme for updating prices. In the "CEEI-like" case, this yields a strongly polynomial-time algorithm. We next show that our market admits a natural dual program, and this non-convex labor-market program admits a change of variables that transforms it into a linear program (albeit with irrational coefficients). Finally, leveraging this LP, we give yet another polynomial-time algorithm while deriving an approach for addressing the irrational coefficients in an efficient manner. We note that, even for goods-only linear Fisher markets, obtaining such an LP formulation remains open.

Problem

• Competitive Equilibrium
• Labor Market
• Fisher Market
• Goods and Chores
• Task Pricing

Innovation

• Fisher markets
• competitive equilibrium
• goods and chores
• polynomial-time algorithm
• linear programming formulation