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...
Main Authors: | , , , |
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Format: | Article |
Language: | English |
Published: |
Blackwell Publishing Ltd
2019
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Subjects: | |
Online Access: | View Fulltext in Publisher |
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 |
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ISBN: | 00129682 (ISSN) |
DOI: | 10.3982/ECTA14159 |