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


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 - 2021 Sept


  • Dynamic programming
  • Negative discounting
  • Production chains

ASJC Scopus subject areas

  • Economics and Econometrics


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