Competitive Equilibrium and Trading Networks: A Network Flow Approach

Candogan, Ozan and Epitropou, Markos and Vohra, Rakesh V. (August 2016) Competitive Equilibrium and Trading Networks: A Network Flow Approach. IHS Economics Series 323, 20 p.

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Abstract or Table of Contents

Under full substitutability of preferences, it has been shown that a competitive equilibrium exists in trading networks, and is equivalent (after a restriction to equilibrium trades) to (chain) stable outcomes. In this paper, we formulate the problem of finding an efficient outcome as a generalized submodular flow problem on a suitable network. Equivalence with seemingly weaker notions of stability follows directly from the optimality conditions, in particular the absence of improvement cycles in the flow problem. Our formulation yields strongly polynomial algorithms for finding competitive equilibria in trading networks, and testing (chain) stability.

Item Type: IHS Series
Keywords: Trading Networks, Competitive Equilibrium, Stability, Submodular Flow Problems, Discrete Convexity
Research Groups: Financial Markets and Econometrics
Macroeconomics and Public Finance
Status: Published
Date Deposited: 04 Aug 2016 07:34
Last Modified: 19 Oct 2017 10:09
URI: http://irihs.ihs.ac.at/id/eprint/4027

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