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Stable Trading Structures in Bilateral Oligopolies

  • Bloch, Francis
  • Ghosal, Sayantan

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Masahiro Okuno, 1977. "Oligopoly and Competition in Large Markets," Discussion Papers 305, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 85-98, January.
  3. Hart, Sergiu, 1974. "Formation of cartels in large markets," Journal of Economic Theory, Elsevier, vol. 7(4), pages 453-466, April.
  4. Aumann, Robert J., 1973. "Disadvantageous monopolies," Journal of Economic Theory, Elsevier, vol. 6(1), pages 1-11, February.
  5. Patrick Legros, 1987. "Disadvantageous syndicates and stable cartels: the case of the nucleolus," ULB Institutional Repository 2013/7046, ULB -- Universite Libre de Bruxelles.
  6. Guesnerie Roger, 1976. "Monopoly, syndicate and shapley value : about some conjectures," CEPREMAP Working Papers (Couverture Orange) 7604, CEPREMAP.
  7. 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.
  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. Shitovitz, Benyamin, 1973. "Oligopoly in Markets with a Continuum of Traders," Econometrica, Econometric Society, vol. 41(3), pages 467-501, May.
  10. Andrew Postlewaite & Robert W. Rosenthal, 1973. "Disadvantageous Syndicates," Discussion Papers 40, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  12. Andrew Postlewaite, 1974. "Disadvantageous Syndicates in Exchange Economies," Discussion Papers 105, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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