In matching models, pairwise-stable outcomes do not generally exist without substantial restrictions on both preferences and the topology of the network of contracts. We address the foundations of matching markets by developing a matching model with a continuum of agents that allows for arbitrary preferences and network structures. We show that pairwise-stable outcomes are guaranteed to exist. When agents can interact with multiple other counterparties, pairwise stability is too weak of a solution concept, and we argue that a refinement of it called tree stability is the most appropriate solution concept in this setting. Our main results show that tree-stable outcomes exist for arbitrary preferences and network topologies.

We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes and commissions. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative solution concept called trail stability . However, competitive equilibria are generally neither stable nor Pareto‐efficient.

We show that with indivisible goods, the existence of competitive equilibrium fundamentally depends on agents’ substitution effects, not their income effects. Our equilibrium existence duality allows us to transport results on the existence of competitive equilibrium from settings with transferable utility to settings with income effects. One consequence is that net substitutability—which is a strictly weaker condition than gross substitutability—is sufficient for the existence of competitive equilibrium. Further applications give new existence results beyond the case of (net) substitutes. Our results have implications for auction design.