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Stable Trading Structures in Bilateral Oligopolies

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  • BLOCH, Francis

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

  • GHOSAL, Sayantan

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

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

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1994056.

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Date of creation: 01 Oct 1994
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Handle: RePEc:cor:louvco:1994056

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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. Masahiro Okuno, 1977. "Oligopoly and Competition in Large Markets," Discussion Papers 305, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Andrew Postlewaite, 1974. "Disadvantageous Syndicates in Exchange Economies," Discussion Papers 105, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Postlewaite, Andrew & Rosenthal, Robert W., 1974. "Disadvantageous syndicates," Journal of Economic Theory, Elsevier, vol. 9(3), pages 324-326, November.
  5. Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 85-98, January.
  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. 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.
  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. Shitovitz, Benyamin, 1973. "Oligopoly in Markets with a Continuum of Traders," Econometrica, Econometric Society, vol. 41(3), pages 467-501, May.
  11. Aumann, Robert J., 1973. "Disadvantageous monopolies," Journal of Economic Theory, Elsevier, vol. 6(1), pages 1-11, February.
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Cited by:
  1. 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.
  2. BLOCH , Francis & FERRER, Hélène, . "Strategic complements and substitutes in bilateral oligopolies," CORE Discussion Papers RP -1557, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. 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).
  4. 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.
  5. 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.
  6. GABSZEWICZ, Jean & GRAZZINI, Lisa, 1998. "Taxing market power," CORE Discussion Papers 1998048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Leonidas C. Koutsougeras and & Nicholas Ziros, 2006. "A three way equivalence," The School of Economics Discussion Paper Series 0634, Economics, The University of Manchester.
  8. Yves Zenou & Jacques-François Thisse, 1997. "Segmentation et marchés locaux du travail," Économie et Prévision, Programme National Persée, vol. 131(5), pages 65-76.
  9. 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.
  10. Breton, Régis & Gobillard, Bertrand, 2011. "Robustness of equilibrium price dispersion in finite market games," TSE Working Papers 11-308, Toulouse School of Economics (TSE).
  11. 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.
  12. Alex Dickson, 2013. "The Effects of Entry in Bilateral Oligopoly," Games, MDPI, Open Access Journal, vol. 4(3), pages 283-303, June.
  13. Dickson, Alex & Hartley, Roger, 2008. "The strategic Marshallian cross," Games and Economic Behavior, Elsevier, vol. 64(2), pages 514-532, November.
  14. 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.
  15. A. Dickson & R. Hartley, 2005. "The strategic Marshallian cross and bilateral oligopoly," The School of Economics Discussion Paper Series 0523, Economics, The University of Manchester.
  16. Koutsougeras, Leonidas C. & Ziros, Nicholas, 2008. "A three way equivalence," Journal of Economic Theory, Elsevier, vol. 139(1), pages 380-391, March.
  17. Biglaiser, Gary & Vettas, Nikolaos, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.

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