January 2021
Article
Theoretical Economics

Chain Stability in Trading Networks

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

Format:Print

Abstract

We show that in general trading networks with bilateral contracts, a suitably adapted chain stability concept (Ostrovsky, 2008) is equivalent to stability (Hatfield and Kominers, 2012; Hatfield et al., 2013) if all agents' preferences are fully substitutable and satisfy the Laws of Aggregate Supply and Demand. Furthermore, in the special case of trading networks with transferable utility, an outcome is consistent with competitive equilibrium if and only if it is not blocked by any chain of contracts.

Keywords

Matching; Trading Networks; Chain Stability; Stability; Competitive Equilibria; Full Substitutability; Laws Of Aggregate Supply And Demand; Contracts; Market Design; Balance And Stability

Citation

Hatfield, John William, Scott Duke Kominers, Alexandru Nichifor, Michael Ostrovsky, and Alexander Westkamp. "Chain Stability in Trading Networks." Theoretical Economics 16, no. 1 (January 2021): 197–234.