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Stability and Competitive Equilibrium in Trading Networks

Author

Listed:
  • 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.

Suggested Citation

  • John William Hatfield & Scott Duke Kominers & Alexandru Nichifor & Michael Ostrovsky & Alexander Westkamp, 2013. "Stability and Competitive Equilibrium in Trading Networks," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 966-1005.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/673402
    DOI: 10.1086/673402
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    References listed on IDEAS

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    4. John William Hatfield & Fuhito Kojima, 2008. "Matching with Contracts: Comment," American Economic Review, American Economic Association, vol. 98(3), pages 1189-1194, June.
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