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Stability and Competitive Equilibrium in Trading Networks

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  • John William Hatfield
  • Scott Duke Kominers
  • Alexandru Nichifor
  • Michael Ostrovsky
  • Alexander Westkamp

Abstract

We introduce a model in which agents in a network can trade via bilateral contracts. We find that when continuous transfers are allowed and utilities are quasi-linear, the full substitutability of preferences is sufficient to guarantee the existence of stable outcomes for any underlying network structure. Furthermore, the set of stable outcomes is essentially equivalent to the set of competitive equilibria, and all stable outcomes are in the core and are efficient. By contrast, for any domain of preferences strictly larger than that of full substitutability, the existence of stable outcomes and competitive equilibria cannot be guaranteed.

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File URL: http://www.jstor.org/stable/full/10.1086/673402
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 121 (2013)
Issue (Month): 5 ()
Pages: 966 - 1005

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Handle: RePEc:ucp:jpolec:doi:10.1086/673402

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Web page: http://www.journals.uchicago.edu/JPE/

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Cited by:
  1. John William Hatfield & Charles R. Plott & Tomomi Tanaka, 2012. "Understanding Price Controls and Nonprice Competition with Matching Theory," American Economic Review, American Economic Association, vol. 102(3), pages 371-75, May.
  2. Bettina Klaus & Frédéric Payot, 2013. "Paths to Stability in the Assignment Problem," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 13.14, Université de Lausanne, Faculté des HEC, DEEP.
  3. Jeremy T. Fox & Chenyu Yang, 2012. "Unobserved Heterogeneity in Matching Games," NBER Working Papers 18168, National Bureau of Economic Research, Inc.
  4. Bernard Salanié & Alfred Galichon, 2012. "Cupid's Invisible Hand: Social Surplus and Identification in Matching Models," Sciences Po publications info:hdl:2441/5rkqqmvrn4t, Sciences Po.
  5. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
  6. Weyl, E. Glen & White, Alexander & Azevedo, Eduardo M., 2013. "Walrasian equilibrium in large, quasi-linear markets," Theoretical Economics, Econometric Society, vol. 8(2), May.
  7. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.
  8. Danilov, V. & Koshevoy, G. & Lang, C., 2013. "Equilibria in Markets with Indivisible Goods," Journal of the New Economic Association, New Economic Association, vol. 18(2), pages 10-34.
  9. N. Roketskiy, 2012. "Farsightedly Stable Matchings," Working Papers 12-26, NET Institute.
  10. John William Hatfield & Scott Duke Kominers, 2012. "Matching in Networks with Bilateral Contracts," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 176-208, February.
  11. John William Hatfield & Fuhito Kojima & Scott Duke Kominers, 2014. "Investment Incentives in Labor Market Matching," American Economic Review, American Economic Association, vol. 104(5), pages 436-41, May.

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