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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.

Suggested Citation

  • BLOCH, Francis & GHOSAL, Sayantan, 1994. "Stable Trading Structures in Bilateral Oligopolies," CORE Discussion Papers 1994056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1994056
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    References listed on IDEAS

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    Cited by:

    1. Codognato, Giulio & Ghosal, Sayantan & Tonin, Simone, 2015. "Atomic Cournotian traders may be Walrasian," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 1-14.
    2. Bloch, Francis & Ferrer, Helene, 2001. "Strategic complements and substitutes in bilateral oligopolies," Economics Letters, Elsevier, vol. 70(1), pages 83-87, January.
    3. 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.
    4. Régis Breton & Bertrand Gobillard, 2005. "Robustness of equilibrium price dispersion in finite market games," Post-Print halshs-00257207, HAL.
    5. Biglaiser, Gary & Vettas, Nikolaos, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
    6. Gabszewicz, Jean J & Grazzini, Lisa, 1999. " Taxing Market Power," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 475-497.
    7. Koutsougeras, Leonidas C. & Ziros, Nicholas, 2008. "A three way equivalence," Journal of Economic Theory, Elsevier, vol. 139(1), pages 380-391, March.
    8. 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.
    9. Jacques-François Thisse & Yves Zenou, 1997. "Segmentation et marchés locaux du travail," Économie et Prévision, Programme National Persée, vol. 131(5), pages 65-76.
    10. Ludovic Alexandre Julien, 2017. "Hierarchical competition and heterogeneous behavior in noncooperative oligopoly markets," EconomiX Working Papers 2017-22, University of Paris Nanterre, EconomiX.
    11. Cont, Walter & Porto, Guido, 2014. "Measuring the impact of a change in the price of Cashew received by exporters on farmgate prices and poverty in Guinea-Bissau," Policy Research Working Paper Series 7036, The World Bank.
    12. Dickson, Alex & Hartley, Roger, 2008. "The strategic Marshallian cross," Games and Economic Behavior, Elsevier, vol. 64(2), pages 514-532, November.
    13. Leonidas C. Koutsougeras and & Nicholas Ziros, 2006. "A three way equivalence," The School of Economics Discussion Paper Series 0634, Economics, The University of Manchester.
    14. Bjornerstedt, Jonas & Stennek, Johan, 2007. "Bilateral oligopoly -- The efficiency of intermediate goods markets," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 884-907, October.
    15. Funaki, Y. & Houba, H.E.D. & Motchenkova, E., 2012. "Market Power in Bilateral Oligopoly Markets with Nonexpendable Infrastructure," Discussion Paper 2012-041, Tilburg University, Tilburg Law and Economic Center.
    16. 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.
    17. 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).
    18. Alex Dickson, 2013. "The Effects of Entry in Bilateral Oligopoly," Games, MDPI, Open Access Journal, vol. 4(3), pages 1-21, June.
    19. Ludovic A. Julien, 2015. "A note on market power in bilateral oligopoly," Economics Bulletin, AccessEcon, vol. 35(1), pages 400-406.
    20. 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.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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