Chain stability in trading networks

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.

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Specifying a Structural Matching Game of Trading Networks with Transferable Utility

The American Economic Review ◽

10.1257/aer.p20171114 ◽

2017 ◽

Vol 107 (5) ◽

pp. 256-260 ◽

Cited By ~ 2

Author(s):

Jeremy T. Fox

Keyword(s):

Structural Model ◽

Competitive Equilibrium ◽

Empirical Work ◽

Solution Concept ◽

Transferable Utility ◽

Pairwise Stability ◽

Matching Games ◽

Matching Game ◽

Theoretic Solution ◽

Trading Networks

Structural estimation of matching games with transferable utility, including matching games of trading networks and many-to-many matching, is increasingly popular in empirical work. I explore several modeling decisions that need to be made when specifying a structural model for a matching game. One decision is the choice of a game theoretic solution concept to impose in the structural model. I discuss pairwise stability, competitive equilibrium, and noncooperative games such as auctions. Another decision is whether to work with a continuum of agents or a finite number of agents. I explore other issues as well.

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Competitive Equilibrium and Trading Networks: A Network Flow Approach

Operations Research ◽

10.1287/opre.2020.1997 ◽

2020 ◽

Author(s):

Ozan Candogan ◽

Markos Epitropou ◽

Rakesh V. Vohra

Keyword(s):

Network Flow ◽

Competitive Equilibrium ◽

Flow Problem ◽

Comparative Statics ◽

Bilateral Contracts ◽

Submodular Flow ◽

Competitive Equilibria ◽

Trading Networks ◽

The Impact ◽

Shed Light

This paper considers a network of agents who trade indivisible goods or services via bilateral contracts. Under a substitutability assumption on preferences, it is known that a competitive equilibrium exists. In “Competitive Equilibrium and Trading Networks: A Network Flow Approach,” Candogan, Epitropou, and Vohra show how to determine equilibrium outcomes as a generalized submodular flow problem. Existence of a competitive equilibrium and its equivalence to seemingly weaker notions of stability follow directly from the optimality conditions of the flow problem. The formulation enables the authors to perform comparative statics with respect to the number of buyers, sellers, and trades. In particular, they are able to shed light on the impact of new trading opportunities on the equilibrium trades, prices, and surpluses. In addition, they present algorithms for finding competitive equilibria in trading networks and testing stability.

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On the Concept of the Foreign Exchange Multiplier

The Pakistan Development Review ◽

10.30541/v14i2pp.233-237 ◽

1975 ◽

Vol 14 (2) ◽

pp. 233-237

Author(s):

J. Diamond

Keyword(s):

Foreign Exchange ◽

Realistic Model ◽

Domestic Production ◽

Supply Elasticity ◽

Aggregate Supply ◽

Multiplier Effect ◽

Special Case

Although in recent years there has been increasing recognition of the import¬ance of intermediary imports, the conventional Keynesian treatment of aggregate " supply has-generally been adopted. By assuming supply elasticity and conditions of over-production, such imports are treated as a leakage and-therefore deflationary. This paper investigates another special case which may be a more realistic model for many industrialising economies like Pakistan. Namely, J,y assuming supply bottlenecks and the technical dependence of domestic production on imported inputs, an increase in imports may be inflationary and have an import or foreign exchange multiplier effect.

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