Endogenous Trading Networks
AbstractWe investigate the effects of a class of trading protocols on the architecture and efficiency properties of endogenously formed trading networks. In our model, the opportunity to sell valuable objects occurs randomly to different individuals. A sale can only be realized if two individuals are connected, directly or indirectly, but forming and maintaining a trading relation is a costly investment. When the outcome of trading is efficient and provides no intermediation rents, a tension between equilibrium and efficient networks emerges when the cost of forming a link is at an intermediate level. There are two types of inefficiencies. Either all equilibrium networks are under- connected when compared to efficient networks, or a multiplicity of equilibriam may exist and agents may fail to coordinate on the efficient equilibrium network
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Bibliographic InfoPaper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 705.
Date of creation: 01 Mar 2012
Date of revision:
Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-GTH-2012-03-08 (Game Theory)
- NEP-MIC-2012-03-08 (Microeconomics)
- NEP-NET-2012-03-08 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daniele Condorelli & Andrea Galeotti, 2012. "Bilateral Trading in Networks," Economics Discussion Papers 704, University of Essex, Department of Economics.
- Marc de Kamps & Daniel Ladley & Aistis Simaitis, 2012.
"Heterogeneous Beliefs in Over-The-Counter Markets,"
Discussion Papers in Economics
13/03, Department of Economics, University of Leicester, revised Sep 2013.
- BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012.
"Bargaining and delay in trading networks,"
CORE Discussion Papers
2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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