Competitive equilibria in matching models with financial constraints

P. Jean-Jacques Herings*, Yu Zhou

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review


We consider a matching with contracts model in which buyers face financial constraints. In this model, a competitive equilibrium may fail to exist. We therefore propose the new notion of quantity-constrained competitive equilibrium (QCCE). At a QCCE, buyers form expectations about the expected supply of trades. A buyer may expect that a trade is not to be supplied if the corresponding financial constraint is binding. We show the existence of QCCEs via a dynamic process that updates prices and quantity constraints, the equivalence between QCCE outcomes and stable outcomes, and some other properties of QCCEs like the lattice property.
Original languageEnglish
Pages (from-to)777-802
JournalInternational Economic Review
Issue number2
Publication statusPublished - May 2022




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