What factors determine the number of trading partners?

Noriaki Matsushima and Ryusuke Shinohara

Journal of Economic Behavior & Organization, 2014, vol. 106, issue C, 428-441

Abstract: The purpose of this paper is to provide a simple model to explain buyer–supplier relationships and identify factors that determine the chosen number of trading partners. We show that the optimal number of partners for a supplier is small, if it has low bargaining power, moderate economies of scope in variable costs, and large sunk investment. We extend the model by incorporating the supplier's quality investment and show that the investment level can be higher when the number of trading partners is small. The results may be consistent with the formation of Japanese buyer–supplier relations.

Keywords: Buyer; Supplier; Investment; Economies of scope (search for similar items in EconPapers)
JEL-codes: C72 C78 D21 L14 M11 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: What factors determine the number of trading partners? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:106:y:2014:i:c:p:428-441

DOI: 10.1016/j.jebo.2014.07.014

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