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Trading in Networks: Theory and Experiment| old_uid | 12401 |
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| title | Trading in Networks: Theory and Experiment |
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| start_date | 2013/04/26 |
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| schedule | 16h |
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| online | no |
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| summary | Intermediation is a prominent feature of economic production and exchange. Two features of intermediation are salient: coordination among traders between the ‘source’ and the ‘destination’ and competition between alternative combinations of intermediaries. We develop a simple model to study these forces and we test the theoretical predictions in experiments. Our theoretical analysis yields a complete characterization of pricing equilibrium in networks. There exist both efficient and inefficient equilibria, suggesting a key role of coordination among intermediaries. Strategic interaction leads to either buyer and seller retaining all surplus or intermediaries extracting all surplus. We develop conditions on network structure under which these different extremal outcomes arise, respectively. Laboratory experiments show that efficiency prevails in almost all cases: so traders are successful in coordination. Subjects coordinate on extreme surplus division. Finally, experiments highlight the role of network structure in determining pricing and the division of surplus among intermediaries. |
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| responsibles | Berestycki, Nadal |
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