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Stable Trading Structures in Bilateral Oligopolies

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  • Bloch, Francis
  • Ghosal, Sayantan

Abstract

This paper analyses the formation of trading groups in a bilateral market with strategic traders. A trading structure (a partition of the set of traders into trading groups) is strongly stable if no coalition of traders can deviate and increase the utility of some of its members while making no other member worse off. It is weakly stable if no coalition of traders can deviate and make all its members strictly better off. The only strongly stable trading structure is the grand coalition, where all agents trade on the same market. Other weakly stable trading structures exist and are characterized by a strong ordering property: trading groups can be ranked by size and cannot contain very different numbers of traders of the two types. In the particular example where traders have log-linear utility functions, the set of weakly stable trading structures is completely characterized.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 74 (1997)
Issue (Month): 2 (June)
Pages: 368-384

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Handle: RePEc:eee:jetheo:v:74:y:1997:i:2:p:368-384

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Web page: http://www.elsevier.com/locate/inca/622869

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References

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  1. Patrick Legros, 1987. "Disadvantageous syndicates and stable cartels: the case of the nucleolus," ULB Institutional Repository 2013/7046, ULB -- Universite Libre de Bruxelles.
  2. Okuno, Masahiro & Postlewaite, Andrew & Roberts, John, 1980. "Oligopoly and Competition in Large Markets," American Economic Review, American Economic Association, vol. 70(1), pages 22-31, March.
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  4. Postlewaite, A & Schmeidler, David, 1978. "Approximate Efficiency of Non-Walrasian Nash Equilibria," Econometrica, Econometric Society, vol. 46(1), pages 127-35, January.
  5. Andrew Postlewaite, 1974. "Disadvantageous Syndicates in Exchange Economies," Discussion Papers 105, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Guesnerie Roger, 1976. "Monopoly, syndicate and shapley value : about some conjectures," CEPREMAP Working Papers (Couverture Orange) 7604, CEPREMAP.
  7. Hart, Sergiu, 1974. "Formation of cartels in large markets," Journal of Economic Theory, Elsevier, vol. 7(4), pages 453-466, April.
  8. Aumann, Robert J., 1973. "Disadvantageous monopolies," Journal of Economic Theory, Elsevier, vol. 6(1), pages 1-11, February.
  9. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
  10. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  11. Novshek, William., 1984. "On the Existence of Cournot Equilibrium," Working Papers 517, California Institute of Technology, Division of the Humanities and Social Sciences.
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Citations

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Cited by:
  1. Amir, Rabah & Bloch, Francis, 2009. "Comparative statics in a simple class of strategic market games," Games and Economic Behavior, Elsevier, vol. 65(1), pages 7-24, January.
  2. Breton, Régis & Gobillard, Bertrand, 2011. "Robustness of equilibrium price dispersion in finite market games," TSE Working Papers 11-308, Toulouse School of Economics (TSE).
  3. BLOCH, Francis & FERRER, Hélène, 1998. "Strategic complements and substitutes in bilateral oligopolies," CORE Discussion Papers 1998030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Yukihiko Funaki & Harold Houba & Evgenia Motchenkova, 2012. "Market Power in Bilateral Oligopoly Markets with Nonexpandable Infrastructures," Tinbergen Institute Discussion Papers 12-139/II, Tinbergen Institute.
  5. Thisse, J.-F. & Zenou, Y., . "Segmentation et marchés locaux du travail," CORE Discussion Papers RP -1306, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Alex Dickson & Roger Hartley, 2007. "The strategic Marshallian cross," Keele Economics Research Papers KERP 2007/13, Centre for Economic Research, Keele University.
  7. Yukihiko Funaki & Harold Houba & Evgenia Motchenkova, 2012. "Market Power in Bilateral Oligopoly Markets with Nonexpandable Infrastructures," Tinbergen Institute Discussion Papers 12-139/II, Tinbergen Institute.
  8. Bloch, Francis & Ferrer, Helene, 2001. "Trade Fragmentation and Coordination in Strategic Market Games," Journal of Economic Theory, Elsevier, vol. 101(1), pages 301-316, November.
  9. Alex Dickson, 2013. "The Effects of Entry in Bilateral Oligopoly," Games, MDPI, Open Access Journal, vol. 4(3), pages 283-303, June.
  10. Biglaiser, Gary & Vettas, Nikolaos, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
  11. Koutsougeras, Leonidas C. & Ziros, Nicholas, 2008. "A three way equivalence," Journal of Economic Theory, Elsevier, vol. 139(1), pages 380-391, March.
  12. GABSZEWICZ, Jean J. & GRAZZINI, Lisa, . "Taxing market power," CORE Discussion Papers RP -1422, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Ben Zissimos, 2006. "The Structure and Performance of the World Market in a Cobb-Douglas Example," Vanderbilt University Department of Economics Working Papers 0623, Vanderbilt University Department of Economics.
  14. Karp, Larry & Sacheti, Sandeep, 1997. "Dynamics and Limited Cooperation In International Environmental Agreements," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4sb827mk, Department of Agricultural & Resource Economics, UC Berkeley.
  15. BLOCH, Francis & FERRER, Hélène, 1999. "Trade fragmentation and coordination in bilateral oligopolies," CORE Discussion Papers 1999008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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