Existence of Stable Exclusive Bilateral Exchanges in Networks

Abstract: In this paper we show that when individuals in a bipartite network exclusively choose partners and exchange valued goods with their partners, then there exists a set of exchanges that are pair-wise stable. Pair-wise stability implies that no individual breaks her partnership and no two neighbors in the network can form a new partnership while breaking other partnerships if any so that at least one of them improves her payoff and the other one does at least as good. We consider a general class of continuous, strictly convex and strongly monotone preferences over bundles of goods for individuals. Thus, this work extends the general equilibrium framework from markets to networks with exclusive exchanges. We present the complete existence proof using the existence of a generalized stable matching in \cite{Generalized-Stable-Matching}. The existence proof can be extended to problems in social games as in \cite{Matching-Equilibrium} and \cite{Social-Games}.