IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/1232.html
   My bibliography  Save this paper

Competition for Goods in Buyer-Seller Networks

Author

Listed:
  • Rachel E. Kranton

    (Dept. Economics, Univ. Maryland)

  • Deborah F. Minehart

    (Dept. Economics, Boston Univ.)

Abstract

The organization of supply relations varies across industries. This paper builds a theoretical framework to compare three alternative supply structures: vertical integration, networks, and markets. The analysis considers the relationship between uncertainty in demand for specific inputs, investment costs, and industrial structure. It shows that network structures are more likely when productive assets are expensive and firms experience large idiosyncratic shocks in demand. The analysis is supported by existing evidence and provides empirical predictions as to the shape of different industries.

Suggested Citation

  • Rachel E. Kranton & Deborah F. Minehart, 1999. "Competition for Goods in Buyer-Seller Networks," Cowles Foundation Discussion Papers 1232, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1232
    as

    Download full text from publisher

    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d12/d1232.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541, Elsevier.
    3. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-872, August.
    4. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rodrigo J. Harrison & Roberto Munoz, 2003. "Stability and Equilibrium Selection in a Link Formation Game," Game Theory and Information 0306004, University Library of Munich, Germany.
    2. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.
    3. Dutta, Bhaskar & Ghosal, Sayantan & Ray, Debraj, 2005. "Farsighted network formation," Journal of Economic Theory, Elsevier, vol. 122(2), pages 143-164, June.
    4. Erkal, Nisvan, 2007. "Buyer-supplier interaction, asset specificity, and product choice," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 988-1010, October.
    5. Matthew O. Jackson, 2002. "The Stability and Efficiency of Economic and Social Networks," Microeconomics 0211011, University Library of Munich, Germany.
    6. Matthew O. Jackson, 2003. "A Survey of Models of Network Formation: Stability and Efficiency," Game Theory and Information 0303011, University Library of Munich, Germany.
    7. Rachel E. Kranton & Deborah F. Minehart, 2002. "Vertical Foreclosure and Specific Investments," Economics Working Papers 0013, Institute for Advanced Study, School of Social Science.
    8. Antonio Quesada, 2004. "Networks and market laws," Microeconomics 0407002, University Library of Munich, Germany.
    9. Felipe Balmaceda, 2004. "Network Formation and Cooperation," Econometric Society 2004 Latin American Meetings 208, Econometric Society.
    10. Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent J., 2011. "Networks of manufacturers and retailers," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 351-367, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
    2. Hiroki Saitoh & Shigehiro Serizawa, 2008. "Vickrey allocation rule with income effect," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(2), pages 391-401, May.
    3. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    4. Mishra, Debasis & Talman, Dolf, 2010. "Characterization of the Walrasian equilibria of the assignment model," Journal of Mathematical Economics, Elsevier, vol. 46(1), pages 6-20, January.
    5. John William Hatfield & Paul R. Milgrom, 2005. "Matching with Contracts," American Economic Review, American Economic Association, vol. 95(4), pages 913-935, September.
    6. Bester, Helmut, 2013. "Investments and the holdup problem in a matching market," Journal of Mathematical Economics, Elsevier, vol. 49(4), pages 302-311.
    7. Jeremy T. Fox, 2018. "Estimating matching games with transfers," Quantitative Economics, Econometric Society, vol. 9(1), pages 1-38, March.
    8. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 537-569, March.
    9. Perez-Castrillo, David & Sotomayor, Marilda, 2002. "A Simple Selling and Buying Procedure," Journal of Economic Theory, Elsevier, vol. 103(2), pages 461-474, April.
    10. Jeremy T. Fox, 2010. "Identification in matching games," Quantitative Economics, Econometric Society, vol. 1(2), pages 203-254, November.
    11. Committee, Nobel Prize, 2012. "Alvin E. Roth and Lloyd S. Shapley: Stable allocations and the practice of market design," Nobel Prize in Economics documents 2012-1, Nobel Prize Committee.
    12. Aron Matskin & Daniel Lehmann, 2009. "General Matching: Lattice Structure of the Set of Agreements," Discussion Paper Series dp501, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    13. Ma, Jinpeng & Nie, Fusheng, 2003. "Walrasian equilibrium in an exchange economy with indivisibilities," Mathematical Social Sciences, Elsevier, vol. 46(2), pages 159-192, October.
    14. Amlendu Kumar Dubey, 2010. "Initial Allocation of Emissions Permits in the Two-Sided Matching Framework," Journal of Quantitative Economics, The Indian Econometric Society, vol. 8(1), pages 95-104, January.
    15. Leshno, Jacob D. & Pradelski, Bary S.R., 2021. "The importance of memory for price discovery in decentralized markets," Games and Economic Behavior, Elsevier, vol. 125(C), pages 62-78.
    16. Bo Chen & Satoru Fujishige & Zaifu Yang, 2010. "Decentralized Market Processes to Stable Job Matchings with Competitive Salaries," KIER Working Papers 749, Kyoto University, Institute of Economic Research.
    17. Shigehiro Serizawa, 2006. "Strategy-Proof and Anonymous Allocation Rules of Indivisible Goods: A New Characterization of Vickrey Allocation Rule," ISER Discussion Paper 0648, Institute of Social and Economic Research, Osaka University.
    18. Marilda Sotomayor, 2009. "Adjusting prices in the multiple-partners assignment game," International Journal of Game Theory, Springer;Game Theory Society, vol. 38(4), pages 575-600, November.
    19. Elliott, M. & Talamàs, E., 2020. "Bargaining Foundations for Price Taking in Matching Markets," Cambridge Working Papers in Economics 2070, Faculty of Economics, University of Cambridge.
    20. Rachel E. Kranton & Deborah F. Minehart, 1999. "Vertical Integration: Networks, and Markets," Cowles Foundation Discussion Papers 1231, Cowles Foundation for Research in Economics, Yale University.

    More about this item

    Keywords

    Bipartite graphs; outside options; link externalities;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:1232. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Brittany Ladd (email available below). General contact details of provider: https://edirc.repec.org/data/cowleus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.