A Theory of Buyer-Seller Networks
- (pp. 485-508)
AbstractThis paper introduces a new model of exchange: networks, rather than markets, of buyers and sellers. It begins with the empirically motivated premise that a buyer and seller must have a relationship, a "link," to exchange goods. Networks--buyers, sellers, and the pattern of links connecting them--are common exchange environments. This paper develops a methodology to study network structures and explains why agents may form networks. In a model that captures characteristics of a variety of industries, the paper shows that buyers and sellers, acting strategically in their own self-interests, can form the network structures that maximize overall welfare.
CitationKranton, Rachel, E., and Deborah F. Minehart. 2001. "A Theory of Buyer-Seller Networks." American Economic Review, 91 (3): 485-508. DOI: 10.1257/aer.91.3.485
- D40 Market Structure and Pricing: General
- L10 Market Structure, Firm Strategy, and Market Performance: General