Trading networks with frictions

Arbeitspapier

We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes, bargaining costs, and incomplete markets. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative stability property called trail stabity. In the presence of frictions, competitive equilibria might be neither stable nor (constrained) Pareto-efficient. In the absence of frictions, on the other hand, competitive equilibria are stable and in the core, even if utility is imperfectly transferable.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CERS-IE Working Papers ; No. CERS-IE WP - 2020/8

Classification and Topics

• Classification: Wirtschaft ; Existence and Stability Conditions of Equilibrium ; Bargaining Theory; Matching Theory ; Market Design ; Exchange and Production Economies ; Incomplete Markets ; Transactional Relationships; Contracts and Reputation; Networks
• Subject: Trading networks ; frictions ; competitive equilibrium ; matching with contracts ; trail stabity ; transaction taxes ; commission

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fleiner, Tamás ; Jagadeesan, Ravi ; Jankó, Zsuzsanna ; Teytelboym, Alexander
• Event: Veröffentlichung
• (who): Hungarian Academy of Sciences, Institute of Economics, Centre for Economic and Regional Studies
• (where): Budapest
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/222077
• Last update: 10.03.2025, 11:42 AM CET