Trading Networks With Frictions

Trading Networks With Frictions

We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes and commissions. When contracts are fully substitutable for firms, competitive equilibria exist and coincide w...

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Bibliographic Details
Main Authors: Fleiner, T. (Author), Jagadeesan, R. (Author), Jankó, Z. (Author), Teytelboym, A. (Author)
Format: Article
Language:English
Published: Blackwell Publishing Ltd 2019
Subjects:
commissions
competitive equilibrium
frictions
matching with contracts
Trading networks
trail stability
transaction taxes
Online Access:View Fulltext in Publisher
Description
Summary:We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes and commissions. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative solution concept called trail stability. However, competitive equilibria are generally neither stable nor Pareto-efficient. © 2019 The Econometric Society
ISBN:00129682 (ISSN)
DOI:10.3982/ECTA14159

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