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Stability and competitive equilibrium in trading networks

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John William Hatfield, Scott Duke Kominers, Alexandru Nichifor, Michael Ostrovsky, Alexander Westkamp

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We introduce a model in which agents in a network can trade via bilateral contracts. We find that when continuous transfers are allowed and utilities are quasilinear, the full substitutability of preferences is sufficient to guarantee the existence of stable outcomes for any underlying network structure. Furthermore, the set of stable outcomes is essentially equivalent to the set of competitive equilibria, and all stable outcomes are in the core and are efficient. By contrast, for any domain of preferences strictly larger than that of full substitutability, the existence of stable outcomes and competitive equilibria cannot be guaranteed.


Original languageEnglish
Pages (from-to)966-1005
Number of pages40
JournalJournal of Political Economy
Issue number5
Publication statusPublished - Oct 2013

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