Competition for Goods in Buyer-Seller Networks

Rachel Kranton and Deborah F. Minehart
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Deborah F. Minehart: Dept. Economics, Boston Univ.

No 1232, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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.

Keywords: Bipartite graphs; outside options; link externalities (search for similar items in EconPapers)
JEL-codes: C70 D20 D40 L10 L20 (search for similar items in EconPapers)
Pages: 38 pages
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published in Review of Economic Design (September 2000), 5(3): 301-331

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