Full Substitutability

62 Pages Posted: 31 Aug 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 Melbourne

Michael Ostrovsky

Stanford Graduate School of Business

Alexander Westkamp

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

Date Written: August 31, 2018

Abstract

Various forms of substitutability are essential for establishing the existence of equilibria and other useful properties in diverse settings such as matching, auctions, and exchange economies with indivisible goods. We extend earlier models’ definitions of substitutability to settings in which each agent can be both a buyer in some transactions and a seller in others, and show that all these definitions are equivalent. We then introduce a new class of substitutable preferences that allows us to model intermediaries with production capacity. We also prove that substitutability is preserved under economically important transformations such as trade endowments, mergers, and limited liability.

JEL Classification: C62, C78, D44, D47

Suggested Citation

Hatfield, John William and Kominers, Scott Duke and Nichifor, Alexandru and Ostrovsky, Michael and Westkamp, Alexander, Full Substitutability (August 31, 2018). Harvard Business School Entrepreneurial Management Working Paper No. 19-016; Stanford University Graduate School of Business Research Paper No. 18-40. Available at SSRN: https://ssrn.com/abstract=3242128 or http://dx.doi.org/10.2139/ssrn.3242128

John William Hatfield

University of Texas at Austin ( email )

Austin, TX 78712
United States

Scott Duke Kominers (Contact Author)

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

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

Alexandru Nichifor

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

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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