When Do Markets Work? Multiplex Networks and Efficiency

Chengqing Li, Yves Zenou and Junjie Zhou

Papers from arXiv.org

Abstract: We study an Arrow-Debreu economy with externalities generated by multiplex networks. Market equilibrium prices reflect not only preferences and the scarcity of goods, but also consumers' network positions induced by goods-specific externalities and the linkages across goods arising from the endogenous budget constraint. We quantify the departures of equilibrium allocations from Pareto efficiency using both a utility-based measure of efficiency loss and a coefficient of resource utilization, thereby linking network multiplexity quantitatively to equilibrium performance. These measures also identify zero-efficiency-loss cases: competitive equilibria are efficient when the relevant network-centrality vectors are parallel, a condition satisfied, in particular, when all networks are regular or when all layers share the same network structure. When competitive markets allocate goods inefficiently, a Lindahl equilibrium implemented through personalized prices can restore efficiency, although it may leave some consumers worse off.

Date: 2026-05, Revised 2026-10
New Economics Papers: this item is included in nep-com, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://arxiv.org/pdf/2605.21117 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2605.21117

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().