A Theory of Buyer-Seller Networks

By Rachel Kranton, Deborah Minehart. 2001

666 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/0b67ad475c3df1dcc6194e08ae5c0b98f7b09ebf

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In Economics and Econometrics

In Management Science and Operations Research

Citations in the corpus

Economics: An Emerging Small World (2004, background): “For two authorsN p {1, 2, … , n} i, , we define as the academic relationship betweenj N g {0, 1}i,j them, with signifying that the two authors have published oneg p 1i,j or more papers together and otherwise.”
“Nash-in-Nash” Bargaining: A Microfoundation for Applied Work (2014, background): “As noted in Lee and Fong (2013), the equilibrium set of agreements that forms and the division of surplus for those agreements may be intertwined.”
The formation of risk sharing networks (2007, background): “Kranton & Minehart (2001) have examined the restrictions on exchange that network relationships place on exchange.”
Vertical Integration in the Presence of Upstream Competition (2004, background): “45 The payoffs here are related to cooperative games in partition function form (see Myerson (1980) for a discussion).”
Contests for Cooperation - A New Approach in German Innovation Policy (2005, background): “This implies that actors must be ‘linked’ (Kranton and Minehart, 2001), i.e. they have to spend some actor-specific transaction cost.”
The Economic Impact of Social Ties: Evidence from German Reunification* (2011, neutral): “(1996), Rauch and Casella (1998), Kranton and Minehart (2001), and Ambrus, Mobius, and Szeidl (2010)), we believe our paper to be the first to provide causally interpretable evidence on this matter.”