Equilibrium in Production Chains with Multiple Upstream Partners

Meng Yu and Junnan Zhang

Papers from arXiv.org

Abstract: In this paper, we extend and improve the production chain model introduced by Kikuchi et al. (2018). Utilizing the theory of monotone concave operators, we prove the existence, uniqueness, and global stability of equilibrium price, hence improving their results on production networks with multiple upstream partners. We propose an algorithm for computing the equilibrium price function that is more than ten times faster than successive evaluations of the operator. The model is then generalized to a stochastic setting that offers richer implications for the distribution of firms in a production network.

Date: 2019-08
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Published in Journal of Mathematical Economics 83 (2019): 1-10

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