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Economic Networking And Stability

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  • Shuntian Yao
  • Ke Li

Abstract

. In this paper we discuss finite economies with the presence of transaction costs and with decreasing, constant or increasing returns. In general such an economy may have no general equilibrium existence and may even have an empty core. We analyse the trading networks of such an economy, introducing the concepts of locally stable network structure, un‐dominated locally stable network structures and most stable network structures. We point out that the set of most stable network structures could be treated as a solution concept for the empty core economies both in theoretical analysis and in application.

Suggested Citation

  • Shuntian Yao & Ke Li, 2008. "Economic Networking And Stability," Pacific Economic Review, Wiley Blackwell, vol. 13(5), pages 632-640, December.
    • Handle: RePEc:bla:pacecr:v:13:y:2008:i:5:p:632-640
    DOI: 10.1111/j.1468-0106.2008.00422.x
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    References listed on IDEAS

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    1. McKenzie, Lionel W, 1981. "The Classical Theorem on Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 49(4), pages 819-841, June.
    2. Shuntian Yao, 2006. "Output Set, Convexity, Specialization And Trade In The Absence Of Comparative Advantages," Division of Labor & Transaction Costs (DLTC), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 15-35.
    3. Yao, Shuntian, 2002. "Walrasian Equilibrium Computation, Network Formation, and the Wen Theorem," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 415-427, October.
    4. Xiaokai Yang & Shuntian Yao, 2005. "Walrasian Sequential Equilibrium, Bounded Rationality, And Social Experiments," Division of Labor & Transaction Costs (DLTC), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 73-98.
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    Cited by:

    1. Ke Li & Chihning Chu & Derfang Hung & Chauchyun Chang & Songlin Li, 2010. "Industrial Cluster, Network And Production Value Chain: A New Framework For Industrial Development Based On Specialization And Division Of Labour," Pacific Economic Review, Wiley Blackwell, vol. 15(5), pages 596-619, December.

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