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

Ping Wang and Alison Watts

Canadian Journal of Economics, 2006, vol. 39, issue 3, 971-1004

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.

JEL-codes: D40 D51 D82 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (22)

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