A Theory of Buyer-Seller Networks
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- 1 June 2001
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 91 (3) , 485-508
- https://doi.org/10.1257/aer.91.3.485
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. (JEL D00, L00)Keywords
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