Stable trading structures in bilateral oligopolies

This paper analyzes the formation of trading groups in a bilateral market where agents trade according to a Shayley-Shubik (J. Polit. Econ. 85 (1977), 937-968.) trading mechanism. The only strongly stable trading structure is the grand coalition, where all agents trade on the same market. Other weakly stable trading structures exist and are characterized by an ordering property: trading groups can be ranked by size and cannot contain very different numbers of traders of the two types. (C) 1997 Academic Press.