Abstract
This 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.
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Kranton, R.E., Minehart, D.F. (2003). A Theory of Buyer-Seller Networks. In: Dutta, B., Jackson, M.O. (eds) Networks and Groups. Studies in Economic Design. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-24790-6_16
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DOI: https://doi.org/10.1007/978-3-540-24790-6_16
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