Stable and Efficient Electronic Business Networks: Key Players and the Dilemma of Peripheral Firms
AbstractThis paper studies a spatial model of electronic business network formation where firms build links based on a cost-benefit analysis. Benefits result from directly and indirectly connected firms in terms of knowledge flows, which are heterogeneous: a "key-player" (e.g. a firm providing an exchange platform in a business-to-business network) provides a higher level of knowledge flows than "peripheral" firms (e.g. tier 3 suppliers in a vertically differentiated industry). For intermediate cost values of link formation, stable and efficient network structures comprise only a subset of the total set of firms, excluding peripheral firms which are most distantly located to the key player. When link formation implies a certain degree of network congestion, the stable and efficient network size is smaller than in a model with bilateral decisions upon link formation between two firms.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 05-21.
Length: 20 pages
Date of creation: Oct 2005
Date of revision: Oct 2005
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Network Formation; Business-to-Business; Spatial Model;
Other versions of this item:
- Kai Sülzle, 2005. "Stable and Efficient Electronic Business Networks: Key Players and the Dilemma of Peripheral Firms," Ifo Working Paper Series Ifo Working Papers No. 22, Ifo Institute for Economic Research at the University of Munich.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-12 (All new papers)
- NEP-BEC-2006-11-12 (Business Economics)
- NEP-MIC-2006-11-12 (Microeconomics)
- NEP-NET-2006-11-12 (Network Economics)
- NEP-SOC-2006-11-12 (Social Norms & Social Capital)
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