scholarly journals Stability and Competitive Equilibrium in Trading Networks

2013 ◽  
Vol 121 (5) ◽  
pp. 966-1005 ◽  
Author(s):  
John William Hatfield ◽  
Scott Duke Kominers ◽  
Alexandru Nichifor ◽  
Michael Ostrovsky ◽  
Alexander Westkamp
Keyword(s):  
Competitive Equilibrium ◽  
Trading Networks

scholarly journals Competitive Equilibrium and Trading Networks: A Network Flow Approach

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.

Trading in Networks: A Normal Form Game Experiment

2009 ◽  
Vol 1 (2) ◽  
pp. 114-132 ◽  
Author(s):  
Douglas M Gale ◽  
Shachar Kariv
Keyword(s):  
Experimental Study ◽  
Normal Form ◽  
Competitive Equilibrium ◽  
Payoff Function ◽  
Equilibrium Behavior ◽  
Normal Form Game ◽  
Market Friction ◽  
Pricing Behavior ◽  
Trading Networks ◽  
Pricing Rule

This paper reports an experimental study of trading networks. Networks are incomplete in the sense that each trader can only exchange assets with a limited number of other traders. The greater the incompleteness of the network, the more intermediation is required to transfer the assets between initial and final owners. The uncertainty of trade in networks constitutes a potentially important market friction. Nevertheless, we find the pricing behavior observed in the laboratory converges to competitive equilibrium behavior in a variety of treatments. However, the rate of convergence varies depending on the network, pricing rule, and payoff function. (JEL C91, C92, G10, G19)

Specifying a Structural Matching Game of Trading Networks with Transferable Utility

2017 ◽  
Vol 107 (5) ◽  
pp. 256-260 ◽  
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.

scholarly journals Chain stability in trading networks

2021 ◽  
Vol 16 (1) ◽  
pp. 197-234
Author(s):  
John William Hatfield ◽  
Scott Duke Kominers ◽  
Alexandru Nichifor ◽  
Michael Ostrovsky ◽  
Alexander Westkamp
Keyword(s):  
General Model ◽  
Competitive Equilibrium ◽  
Supply And Demand ◽  
Transferable Utility ◽  
Pairwise Stability ◽  
Bilateral Contracts ◽  
Aggregate Supply ◽  
Trading Networks ◽  
Special Case ◽  
Stability Concept

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.

scholarly journals The Issue of Macroeconomic Closure Revisited and Extended

2016 ◽  
Vol 66 (1) ◽  
pp. 1-31
Author(s):  
Ernő Zalai ◽  
Tamás Révész
Keyword(s):  
General Equilibrium ◽  
Open Economy ◽  
Computable General Equilibrium ◽  
Statistical Data ◽  
Competitive Equilibrium ◽  
Numerical Models ◽  
Cge Model ◽  
Sector Model ◽  
Cge Models ◽  
Policy Simulations

Léon Walras (1874) had already realised that his neo-classical general equilibrium model could not accommodate autonomous investments. In the early 1960s, Amartya Sen analysed the same issue in a simple, one-sector macroeconomic model of a closed economy. He showed that fixing investment in the model, built strictly on neo-classical assumptions, would make the system overdetermined, and thus one should loosen some neo-classical conditions of competitive equilibrium. He analysed three not neo-classical “closure options”, which could make the model well-determined in the case of fixed investment. His list was later extended by others and it was shown that the closure dilemma arises in the more complex computable general equilibrium (CGE) models as well, as does the choice of adjustment mechanism assumed to bring about equilibrium at the macro level. It was also illustrated through several numerical models that the adopted closure rule can significantly affect the results of policy simulations based on a CGE model. Despite these warnings, the issue of macro closure is often neglected in policy simulations. It is, therefore, worth revisiting the issue and demonstrating by further examples its importance, as well as pointing out that the closure problem in the CGE models extends well beyond the problem of how to incorporate autonomous investments into a CGE model. Several closure rules are discussed in this paper and their diverse outcomes are illustrated by numerical models calibrated on statistical data. First, the analyses are done in a one-sector model, similar to Sen’s, but extended into a model of an open economy. Next, the same analyses are repeated using a fully-fledged multi-sectoral CGE model, calibrated on the same statistical data. Comparing the results obtained by the two models it is shown that although they generate quite similar results in terms of the direction and — to a somewhat lesser extent — of the magnitude of change in the main macro variables using the same closure option, the predictions of the multi-sectoral CGE model are clearly more realistic and balanced.

scholarly journals Holding a group together: non-game-theory vs. game-theory

2021 ◽  
Author(s):  
Michael Richter ◽  
Ariel Rubinstein
Keyword(s):  
Game Theory ◽  
Nash Equilibrium ◽  
Competitive Equilibrium ◽  
Solution Concept ◽  
Equilibrium Concept

Abstract Each member of a group chooses a position and has preferences regarding his chosen position. The group’s harmony depends on the profile of chosen positions meeting a specific condition. We analyse a solution concept (Richter and Rubinstein, 2020) based on a permissible set of individual positions, which plays a role analogous to that of prices in competitive equilibrium. Given the permissible set, members choose their most preferred position. The set is tightened if the chosen positions are inharmonious and relaxed if the restrictions are unnecessary. This new equilibrium concept yields more attractive outcomes than does Nash equilibrium in the corresponding game.

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