Bargaining Frictions in Trading Networks

摘要

In the canonical model of frictionless markets, arbitrage is usually taken to force all trades of homogeneousrngoods to occur at essentially the same price. In the real world, however, arbitrage possibilities are often severelyrnrestricted and this may lead to substantial price heterogeneity. Here we focus on frictions that can be modeledrnas the bargaining constraints induced by an incomplete trading network. In this context, the interplay among thernarchitecture of the trading network, the buyers’ valuations, and the sellers’ costs shapes the effective arbitragernpossibilities of the economy. We characterize the configurations that, at an intertemporal bargaining equilibrium,rnlead to a uniform price. Conceptually, this characterization involves studying how the network positionsrnand valuations/costs of any given set of buyers and sellers affect their collective bargaining power relative to arnnotional or benchmark situation in which the connectivity is complete. Mathematically, the characterizing conditionsrncan be understood as price-based counterparts of those identified by the celebrated Marriage Theoremrnin matching theory.