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What Factors Determine the Number of Trading Partners?

39 Pages Posted: 28 Apr 2011  

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER)

Ryusuke Shinohara

Department of Economics, Hosei University

Date Written: April 22, 2011

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.

Keywords: buyer, supplier, investment, economies of scope

JEL Classification: L14, M11

Suggested Citation

Matsushima, Noriaki and Shinohara, Ryusuke, What Factors Determine the Number of Trading Partners? (April 22, 2011). ISER Discussion Paper No. 808. Available at SSRN: https://ssrn.com/abstract=1824916 or http://dx.doi.org/10.2139/ssrn.1824916

Noriaki Matsushima (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Ryusuke Shinohara

Department of Economics, Hosei University ( email )

4342
Aihara-machi
Machida, Tokyo 194-0298
Japan
+81-42-783-2534 (Phone)

HOME PAGE: http://ryusukeshinohara.ehoh.net/

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