Formation of buyer-seller trade networks in a quality-differentiated product market

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Formation of buyer-seller trade networks in a quality-differentiated product market

Author Info

Ping Wang
Alison Watts

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Ping Wang

Abstract

We examine the formation of buyer-seller links when exchange can take place only if such a link exists. Sellers produce products of different qualities, and multiple sellers can form a sellers' association to pool their customers setting uniform prices. Buyers form trade links with individual sellers or sellers' associations. We show which buyer-seller links will form and find the set of links that are stable and show how these links influence prices. We also show that a trade network mismatch may occur where a high-quality good remains unsold even without an economy-wide excess supply of goods.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 39 (2006)
Issue (Month): 3 (August)
Pages: 971-1004
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Handle: RePEc:cje:issued:v:39:y:2006:i:3:p:971-1004

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Related research
Keywords:

Find related papers by JEL classification:
D40 - Microeconomics - - Market Structure and Pricing - - - General
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Bhaskar Dutta & Sayantan Ghosal & Debraj Ray, 2004. "Farsighted Network Formation," Working papers 122, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
Other versions:
- Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June. [Downloadable!] (restricted)
Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, EconWPA. [Downloadable!]
Other versions:
- Matthew O. Jackson, 2003. "A survey of models of network formation: Stability and efficiency," Working Papers 1161, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]

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