Coase meets Bellman: Dynamic programming for production networks

Tomoo Kikuchi, Kazuo Nishimura, John Stachurski and Junnan Zhang

Journal of Economic Theory, 2021, vol. 196, issue C

Abstract: We show that competitive equilibria in a range of models related to production networks can be recovered as solutions to dynamic programs. Although these programs fail to be contractive, we prove that they are tractable. As an illustration, we treat Coase's theory of the firm, equilibria in production chains with transaction costs, and equilibria in production networks with multiple partners. We then show how the same techniques extend to other equilibrium and decision problems, such as the distribution of management layers within firms and the spatial distribution of cities.

Keywords: Negative discounting; Dynamic programming; Production chains (search for similar items in EconPapers)
JEL-codes: C61 D21 D90 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Coase Meets Bellman: Dynamic Programming for Production Networks (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:196:y:2021:i:c:s0022053121001046

DOI: 10.1016/j.jet.2021.105287

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