Publications
Publications
- September 2019
- Econometrica
Trading Networks with Frictions
By: Tamás Fleiner, Ravi Jagadeesan, Zsuzsanna Jankó and Alexander Teytelboym
Abstract
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.
Keywords
Trading Networks; Frictions; Competitive Equilibrium; Matching With Contracts; Stability; Trail Stability
Citation
Fleiner, Tamás, Ravi Jagadeesan, Zsuzsanna Jankó, and Alexander Teytelboym. "Trading Networks with Frictions." Econometrica 87, no. 5 (September 2019): 1633–1661.
Supplemental Information
Online appendix