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We study the long-run stability of trade networks in a two-sided economy. Each agent desires relationships with the other side, but having multiple partners is costly. This cost-benefit tradeoff results in each agent having a single-peaked utility over the number of partners-the volume of trade-, the peak being greater for agents on one side than those on the other. We propose a stochastic matching process in which self-interested agents form and sever links over time. Links can be added or deleted, sometimes simultaneously by a single agent.
From:
Roland Pongou
University of Ottawa
Roberto Serrano
Brown University
We study the long-run stability of trade networks in a two-sided economy. Each agent desires relationships with the other side, but having multiple partners is costly. This cost-benefit tradeoff results in each agent having a single-peaked utility over the number of partners-the volume of trade-, the peak being greater for agents on one side than those on the other. We propose a stochastic matching process in which self-interested agents form and sever links over time. Links can be added or deleted, sometimes simultaneously by a single agent.
From:
Roland Pongou
University of Ottawa
Roberto Serrano
Brown University