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Title:Networks and markets: The dynamic impacts of information, matching and transaction costs on trade PDF Logo
Authors:Kumagai, Yuki
Issue Date:2010
Series/Report no.:CeDEx discussion paper series 2010-07
Abstract:The purpose of this paper is to explore strategic incentives to use trade networks rather than markets and shed light on the dynamic relation between the two distinct trading systems: a formal system of markets and a issues in the infinitely repeated multi-player prisoner's dilemma gamedecentralised system of networks. We investigate the with random matching. The existing literature emphasises the importance of information transmission in sustaining long-run cooperation in repeated personal transactions under perfect observability. By contrast, we show that a folk theorem may hold if we change the way traders are matched, without introducing any information sharing. We also examine different stages of the evolution of trading system. The study states conditions under which agents prefer to trade on networks rather than in markets.
Subjects:repeated trade
moral hazard
transaction costs
Document Type:Working Paper
Appears in Collections:CeDEx Discussion Paper Series, The University of Nottingham

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