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Stable Trading Structures in Bilateral Oligopolies

  • 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)

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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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
Date of revision:
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. Postlewaite, Andrew & Rosenthal, Robert W., 1974. "Disadvantageous syndicates," Journal of Economic Theory, Elsevier, vol. 9(3), pages 324-326, November.
  3. Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 85-98, January.
  4. Aumann, Robert J., 1973. "Disadvantageous monopolies," Journal of Economic Theory, Elsevier, vol. 6(1), pages 1-11, February.
  5. 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.
  6. Andrew Postlewaite, 1974. "Disadvantageous Syndicates in Exchange Economies," Discussion Papers 105, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Hart, Sergiu, 1974. "Formation of cartels in large markets," Journal of Economic Theory, Elsevier, vol. 7(4), pages 453-466, April.
  8. Shitovitz, Benyamin, 1973. "Oligopoly in Markets with a Continuum of Traders," Econometrica, Econometric Society, vol. 41(3), pages 467-501, May.
  9. Guesnerie, Roger, 1977. "Monopoly, syndicate, and shapley value: About some conjectures," Journal of Economic Theory, Elsevier, vol. 15(2), pages 235-251, August.
  10. Okuno, Masahiro & Postlewaite, Andrew & Roberts, John, 1980. "Oligopoly and Competition in Large Markets," American Economic Review, American Economic Association, vol. 70(1), pages 22-31, March.
  11. Postlewaite, A & Schmeidler, David, 1978. "Approximate Efficiency of Non-Walrasian Nash Equilibria," Econometrica, Econometric Society, vol. 46(1), pages 127-35, January.
  12. 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.
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