Coase meets Bellman: Dynamic programming for production networks

Tomoo Kikuchi, Kazuo Nishimura, John Stachurski, Junnan Zhang*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    1 Citation (Scopus)


    We show that competitive equilibria in a range of models related to production networks can be recovered as solutions to dynamic programs. Although these programs fail to be contractive, we prove that they are tractable. As an illustration, we treat Coase's theory of the firm, equilibria in production chains with transaction costs, and equilibria in production networks with multiple partners. We then show how the same techniques extend to other equilibrium and decision problems, such as the distribution of management layers within firms and the spatial distribution of cities.

    Original languageEnglish
    Article number105287
    JournalJournal of Economic Theory
    Publication statusPublished - Sept 2021


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