Stability and competitive equilibrium in trading networks

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

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    88 Citations (Scopus)
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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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