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Chain stability in trading networks

Scott Kominers, John William Hatfield (), Alexandru Nichifor (), Michael Ostrovsky and Alexander Westkamp ()
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John William Hatfield: McCombs School of Business, University of Texas at Austin
Alexandru Nichifor: Economics Department, University of Melbourne
Alexander Westkamp: Department of Management, Economics and Social Sciences, University of Cologne

Theoretical Economics, 2021, vol. 16, issue 1

Abstract: In a general model of trading networks with bilateral contracts, we propose a suitably adapted chain stability concept that plays the same role as pairwise stability in two-sided settings. We show that chain stability is equivalent to stability if all agents' preferences are jointly fully substitutable and satisfy the Laws of Aggregate Supply and Demand. In the special case of trading networks with transferable utility, an outcome is consistent with competitive equilibrium if and only if it is chain stable.

Keywords: Matching; trading networks; chain stability; stability; competitive equilibria; full substitutability; Laws of Aggregate Supply and Demand (search for similar items in EconPapers)
JEL-codes: C78 D85 L14 (search for similar items in EconPapers)
Date: 2021-01-15
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Citations: View citations in EconPapers (5)

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