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American Economic Journal: Microeconomics: Vol. 4 No. 1 (February 2012)

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Matching in Networks with Bilateral Contracts

Article Citation

Hatfield, John William, and Scott Duke Kominers. 2012. "Matching in Networks with Bilateral Contracts." American Economic Journal: Microeconomics, 4(1): 176-208.

DOI: 10.1257/mic.4.1.176

Abstract

We introduce a model in which firms trade goods via bilateral contracts which specify a buyer, a seller, and the terms of the exchange. This setting subsumes (many-to-many) matching with contracts, as well as supply chain matching. When firms' relationships do not exhibit a supply chain structure, stable allocations need not exist. By contrast, in the presence of supply chain structure, a natural substitutability condition characterizes the maximal domain of firm preferences for which stable allocations are guaranteed to exist. Furthermore, the classical lattice structure, rural hospitals theorem, and one-sided strategy-proofness results all generalize to this setting. (JEL C78, D85, D86, L14)

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Authors

Hatfield, John William (Stanford U)
Kominers, Scott Duke (Becker Friedman Institute, U Chicago)

JEL Classifications

C78: Bargaining Theory; Matching Theory
D85: Network Formation and Analysis: Theory
D86: Economics of Contract: Theory
L14: Transactional Relationships; Contracts and Reputation; Networks

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