Trading Networks with Frictions

Tamas Fleiner (), Ravi Jagadeesan, Zsuzsanna Janko () and Alexander Teytelboym
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Tamas Fleiner: Centre for Economic and Regional Studies, Institute of Economics
Zsuzsanna Janko: Department of Mathematics, University of Hamburg

No 2008, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: 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, bargaining costs, and incomplete markets. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative stability property called trail stabity. In the presence of frictions, competitive equilibria might be neither stable nor (constrained) Pareto-efficient. In the absence of frictions, on the other hand, competitive equilibria are stable and in the core, even if utility is imperfectly transferable.

Keywords: Trading networks; frictions; competitive equilibrium; matching withcontracts; trail stabity; transaction taxes; commission (search for similar items in EconPapers)
JEL-codes: C62 C78 D47 D51 D52 L14 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-02
New Economics Papers: this item is included in nep-cta, nep-des, nep-mic, nep-net and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Trading Networks With Frictions (2019)
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