Complementary Inputs and the Existence of Stable Outcomes in Large Trading Networks

Jagadeesan, Ravi

doi:10.1145/3033274.3085113

Cited by 16 publications

(13 citation statements)

References 73 publications

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“…Questions of growth exist in macroeconomics as well [Sol56,S.56,Uri13,Ace09] where the focus is on technical progress, i.e., capital accumulation, population growth, etc., and typically uses Cobb-Douglas type production functions. Like in our model, a recent work on trading networks due to [Jag17] also studies trades along edges of an underlying graph, where firms trade contracts consisting of exchange, production and pricing. However, again the focus is on equilibrium existence, which is obtained when the underlying graph is a tree.…”

Section: Related Workmentioning

confidence: 99%

Universal Growth in Production Economies

2018

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We consider a simple variant of the von Neumann model of an expanding economy, in which multiple producers make goods according to their production function. The players trade their goods at the market and then use the bundles acquired for the production in the next round. We study a simple decentralized dynamic-known as proportional response-in which players update their bids proportionally to how useful the investments were in the past round.We show this dynamic leads to growth of the economy in the long term (whenever growth is possible) but also creates unbounded inequality, i.e. very rich and very poor players emerge. We analyze several other phenomena, such as how the relation of a player with others influences its development and the Gini index of the system.One of the key technical findings is that the players learn a global feature of the network (the optimal cycle) in a decentralized way, while interacting locally with their direct neighbors. We obtain this by studying the volume in the resulting dynamical system and showing that the volume of each cycle expands or contracts by a constant factor in each round.

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Section: Related Workmentioning

confidence: 99%

Universal Growth in Production Economies

2018

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“…Not all labor markets can be centralised easily, however. One particularly stark case is the market for federal law clerks in the United States, in which unraveling has been a persistent problem for many years, despite multiple attempts to reorganise the marketplace 10 Indeed, recent work has shown that in sufficiently large matching markets, stable outcomes are likely to exist even in the presence of couples (Kojima and Pathak, 2009;Kojima et al, 2013;Ashlagi et al, 2014;Azevedo et al, 2013;Azevedo and Hatfield, 2015;Che et al, 2015;Jagadeesan, 2017).…”

Section: Related Applicationsmentioning

confidence: 99%

An Invitation to Market Design

2017

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Market design seeks to translate economic theory and analysis into practical solutions to real-world problems. By redesigning both the rules that guide market transactions and the infrastructure that enables those transactions to take place, market designers can address a broad range of market failures. In this paper, we illustrate the process and power of market design through three examples: the design of medical residency matching programs; a scrip system to allocate food donations to food banks; and the recent "Incentive Auction" that reallocated wireless spectrum from television broadcasters to telecoms. Our lead examples show how effective market design can encourage participation, reduce gaming, and aggregate information, in order to improve liquidity, efficiency, and equity in markets. We also discuss a number of fruitful applications of market design in other areas of economic and public policy.

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“…Although these applications are important, accommodating complementary agreements in matching models has proven challenging. 1 Positive existence results have been given when there is a continuum of agents (e.g., Azevedo and Hatfield (2015), Che et al (2017), Kojima et al (2013), Jagadeesan (2017), Scotchmer and Shannon (2015) 2 ) or outcomes (Hatfield and Kominers (2015)). Pycia (2012) shows that stable outcomes exist when preferences are pairwise aligned, a condition that allows for complementarities but demands strong agreement between agents.…”

Section: Introductionmentioning

confidence: 99%

Matching with Complementary Contracts

Rostek

Yoder

2018

SSRN Journal

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In this paper, we provide existence results for matching environments with complementarities, such as markets for patent licenses, differentiated products, or multi-sided platforms. Our results apply to both nontransferable and transferable utility settings, and allow for multilateral agreements and those with externalities. Additionally, we give comparative statics regarding the way primitive characteristics are combined to form the set of available contracts. These show the impact of various contract design decisions, such as the application of antitrust law to disallow patent cross-licenses, on stable outcomes.

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Complementary Inputs and the Existence of Stable Outcomes in Large Trading Networks

Cited by 16 publications

References 73 publications

Universal Growth in Production Economies

Universal Growth in Production Economies

An Invitation to Market Design

Matching with Complementary Contracts

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