Open AccessChain stability in trading networks
Author(s) -
Hatfield John William,
Kominers Scott Duke,
Nichifor Alexandru,
Ostrovsky Michael,
Westkamp Alexander
Publication year - 2021
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te3839
Subject(s) - stability (learning theory) , pairwise comparison , aggregate (composite) , outcome (game theory) , supply chain , chain (unit) , mathematical economics , transferable utility , computer science , microeconomics , economics , game theory , business , artificial intelligence , materials science , physics , marketing , astronomy , machine learning , composite material
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.