American Economic Review Vol. 91 No. 3 2001
A Theory of Buyer-Seller Networks
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.
- DOI
- 10.1257/aer.91.3.485
- Volume
- 91
- Issue
- 3
- Pages
- 485-508
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref