Journal article

Chain stability in trading networks

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

Theoretical Economics | ECONOMETRIC SOCIETY | Published : 2021

Abstract

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.

University of Melbourne Researchers

Grants

Awarded by National Science Foundation


Awarded by Australian Research Council under the Discovery Early Career Research Award


Awarded by People Programme (Marie Curie IntraEuropean Fellowship) of the European Union's Seventh Framework Programme (FP7/2007-2013) under REA Grant


Funding Acknowledgements

An extended abstract of this work appeared in the Proceedings of the 2018 ACM Conference on Economics and Computation. We are grateful to Dirk Bergemann, Ozan Candogan, Vincent Crawford, Dave Donaldson, Tamas Fleiner, Ravi Jagadeesan, Alessandro Pavan, Alvin Roth, Alex Teytelboym, Rakesh Vohra, several referees, and the editor, Federico Echenique, for helpful comments and suggestions. We thank Joseph Shayani for excellent research assistance. Kominers thanks the National Science Foundation (Grants CCF1216095 and SES-1459912, as well as a graduate research fellowship), the Harvard Milton Fund, the Yahoo! Key Scientific Challenges Program, the John M. Olin Center (a Terence M. Considine Fellowship), the Ng Fund and the Mathematics in Economics Research Fund of the Harvard Center of Mathematical Sciences and Applications, the American Mathematical Society, the Simons Foundation, and the University of Melbourne (the Centre for Market Design and an Eminent Research Scholar Award) for support. Nichifor received funding fromthe Australian Research Council under the Discovery Early Career Research Award DE170101183. Ostrovsky thanks the Alfred P. Sloan Foundation for financial support. Westkamp received funding from the German Science Foundation and from the People Programme (Marie Curie IntraEuropean Fellowship) of the European Union's Seventh Framework Programme (FP7/2007-2013) under REA Grant agreement 628276.