Chain Stability in Trading Networks

20 Pages Posted: 30 May 2018

See all articles by John William Hatfield

John William Hatfield

University of Texas at Austin

Scott Duke Kominers

Harvard University

Alexandru Nichifor

University of St. Andrews - School of Economics and Finance

Michael Ostrovsky

Stanford Graduate School of Business

Alexander Westkamp

University of Cologne - Faculty of Management, Economics and Social Sciences

Date Written: April 1, 2015

Abstract

We show that in general trading networks with bilateral contracts, a suitably adapted chain stability concept (Ostrovsky, 2008) is equivalent to stability (Hatfield and Kominers, 2012; Hatfield et al., 2013) if all agents’ preferences are fully substitutable and satisfy the Laws of Aggregate Supply and Demand. Furthermore, in the special case of trading networks with transferable utility, an outcome is consistent with competitive equilibrium if and only if it is not blocked by any chain of contracts.

Keywords: Matching, Stability, Networks, Substitutability

JEL Classification: C62, C78, D47

Suggested Citation

Hatfield, John William and Kominers, Scott Duke and Nichifor, Alexandru and Ostrovsky, Michael and Westkamp, Alexander, Chain Stability in Trading Networks (April 1, 2015). Available at SSRN: https://ssrn.com/abstract=3180740 or http://dx.doi.org/10.2139/ssrn.3180740

John William Hatfield (Contact Author)

University of Texas at Austin ( email )

Austin, TX 78712
United States

Scott Duke Kominers

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

Alexandru Nichifor

University of St. Andrews - School of Economics and Finance ( email )

Castlecliffe
Saint Andrews, Fife KY16 9SS
United Kingdom

HOME PAGE: http://www.nichifor.net

Michael Ostrovsky

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305
United States
650-724-7280 (Phone)

HOME PAGE: http://faculty-gsb.stanford.edu/ostrovsky/

Alexander Westkamp

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

HOME PAGE: http://www.matching.uni-koeln.de/

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