Kilenthong, Weerachart and Qin, Cheng-Zhong (2010): Trade through endogenous intermediaries.
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We apply an intermediation game of Townsend (1983) to analyze trade in an exchange economy through endogenous intermediaries. In this game, each trader has the opportunity to become an intermediary by oering to buy or sell unlimited quantities of the commodities at a certain price vector and for a certain group of customers subject to feasibility constraint. An intermediary will not be active unless some of its customers subsequently choose to trade with it. We introduce an "intermediation core" and show that the subgame-perfect equilibrium allocations of the intermediation game are contained in the intermediation core, similar to the inclusion of competitive equilibrium allocations in the core usually studied. We also identify, in terms of the supporting intermediary structures, intermediation core allocations which are also subgame-perfect equilibrium allocations of the intermediation game. These results provide both a characterization and welfare properties of subgame-perfect equilibrium allocations of the intermediation game.
|Item Type:||MPRA Paper|
|Original Title:||Trade through endogenous intermediaries|
|English Title:||Trade through Endogenous Intermediaries|
|Keywords:||intermediation; core; subgame-perfect equilibrium|
|Subjects:||D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C71 - Cooperative Games
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Weerachart Kilenthong|
|Date Deposited:||16. Apr 2010 14:33|
|Last Modified:||14. Feb 2013 23:45|
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