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A Theory of Buyer-Seller Networks (2001)
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| Venue: | American Economic Review |
| Citations: | 154 - 0 self |
BibTeX
@ARTICLE{Kranton01atheory,
author = {E. Kranton and Deborah F. Minehart},
title = {A Theory of Buyer-Seller Networks},
journal = {American Economic Review},
year = {2001},
volume = {91},
pages = {485--508}
}
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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
