Decentralised trading networks: Equilibria and fairness

Bilateral trading in supply chains, OTC financial markets, and labor markets is pervasive, yet we lack strategic and dynamic foundations for stability in these networked settings; and we understand even less about who benefits from trade. We explore stability and fairness in decentralized networked markets with bilateral contracts, building on the trading networks framework of Hatfield et al. (2013). In our network game, agents make offers to their counterparts, and we show that a well-defined subset of Nash equilibria can be supported as competitive equilibria. In different trading dynamics, we prove new convergence results, providing a rationale for stability in decentralized trading networks. Turning to the tension between fairness and stability, we prove several negative results: agents that are not essential for an efficient allocation always receive zero utility in any core outcome, and even essential agents can get zero utility in all core outcomes. Our results highlight a stark tension between efficiency, stability, and redistribution in networked markets.

This is joint work with Simon Finster, Paul Goldberg, and Matilde Tullii.

The seminar series is organized by the Section Economics of Wageningen University (consisting of the groups Agricultural Economics and Rural Policy, Development Economics, Urban Economics, Environmental Economics and Natural Resources, and Economic and Environmental History).

The seminar is aiming to foster the exchange on recent topics in the field of economics. We consider contributions from all fields of economic research and invite speakers from Wageningen, the Netherlands and abroad.

The seminar is organized as a weekly lunch seminar taking place on campus. Meetings are between 12:00 and 13:00 hours. Lunch is served. 

All staff and students are welcome!