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What factors determine the number of trading partners?

Author

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  • Noriaki Matsushima
  • Ryusuke Shinohara
Abstract
The purpose of the paper is to provide a simple model explaining buyer-supplier relationships and show what factors determine the number of trading partners. We show that when the supplier is able to determine the number of trading partners, the optimal number is small if the supplier's bargaining power with them is weak, the economy of scope in the supplier's variable costs is significant, and that in its sunk investment is weak. Investment may be greater when the number of trading partners is small. The results may be consistent with the formation of Japanese buyer-supplier relations.

Suggested Citation

  • Noriaki Matsushima & Ryusuke Shinohara, 2011. "What factors determine the number of trading partners?," ISER Discussion Paper 0808, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0808
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2011/DP0808.pdf
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    Cited by:

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    2. Noriaki Matsushima & Laixun Zhao, 2018. "Technology spillovers and outside options in a bilateral duopoly," ISER Discussion Paper 1039, Institute of Social and Economic Research, Osaka University.
    3. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
    4. Noriaki Matsushima & Laixun Zhao, 2015. "Multimarket Linkages, Trade and the Productivity Puzzle," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 1-13, February.
    5. Matsushima, Noriaki & Shinohara, Ryusuke, 2019. "Pre-negotiation commitment and internalization in public good provision through bilateral negotiations," Journal of Public Economics, Elsevier, vol. 175(C), pages 84-93.
    6. Noriaki Matsushima, 2017. "Expanding distribution channels," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(3-4), pages 464-484, October.
    7. You, Jing & Imai, Katsushi S. & Gaiha, Raghav, 2016. "Declining Nutrient Intake in a Growing China: Does Household Heterogeneity Matter?," World Development, Elsevier, vol. 77(C), pages 171-191.
    8. Roig, Guillem, 2014. "What Determines Market Structure? An Explanation from Cooperative Investment with Non‐Exclusive Co," TSE Working Papers 14-482, Toulouse School of Economics (TSE).
    9. Noriaki Matsushima & Laixun Zhao, 2015. "Strategic dual sourcing as a driver for free revealing of innovation," ISER Discussion Paper 0936, Institute of Social and Economic Research, Osaka University.
    10. Yamada, Mai, 2016. "The Optimal Trading Partner for an Upstream Monopolist," MPRA Paper 70325, University Library of Munich, Germany.
    11. Noriaki Matsushima & Ryusuke Shinohara, 2015. "The efficiency of monopolistic provision of public goods through simultaneous bilateral bargaining," ISER Discussion Paper 0948, Institute of Social and Economic Research, Osaka University.

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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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