Trade through endogenous intermediaries

Weerachart Kilenthong and Cheng-Zhong Qin

University of California at Santa Barbara, Recent Works in Economics from Department of Economics, UC Santa Barbara

Abstract: We propose an intermediation core for an economy that explicitly specifies how traders organize themselves into trade cooperatives (intermediaries) and how trade between them gets carried out. The intermediation core allocations are closely related to the equilibrium allocations of a non-cooperative intermediation game in Townsend (1983). We show that the intermediation core contains all subgame perfect equilibrium allocations of the intermediation game, similar to the inclusion of competitive equilibrium allocations in the core usually studied. We identify intermediation core allocations that are also subgame perfect equilibrium allocations of the intermediation game in terms of the supporting intermediary structures. These results help to characterize subgame perfect equilibrium allocations of the intermediation game and to analyze their welfare and stability properties. © 2013 Elsevier B.V.

Keywords: Endogenous intermediary; Intermediation game; Intermediation core; Subgame perfect equilibrium; Price formation; Economics; Economic Theory (search for similar items in EconPapers)
Date: 2014-01-01
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Citations: View citations in EconPapers (5)

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Journal Article: Trade through endogenous intermediaries (2014)
Working Paper: Trade through endogenous intermediaries (2010)
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