Journal of Political Economy Vol. 121 No. 5 2013

Stability and Competitive Equilibrium in Trading Networks

John William Hatfield^1,2; Scott Duke Kominers^3,4; Alexandru Nichifor^5,6; Michael Ostrovsky²; Alexander Westkamp⁶

¹ The University of Texas at Austin · ² Stanford University · ³ Harvard University · ⁴ University of Chicago · ⁵ University of St Andrews · ⁶ Maastricht University

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.

DOI

10.1086/673402

Volume

121

Issue

5

Pages

966-1005

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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