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Network Intermediaries in International Trade
Author(s) -
Rauch James E.,
Watson Joel
Publication year - 2004
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2004.00004.x
Subject(s) - intermediary , intermediation , comparative statics , incentive , welfare , business , production (economics) , industrial organization , network formation , microeconomics , economics , international trade , international economics , computer science , market economy , marketing , finance , world wide web
Motivated by evidence on the importance of incomplete information and networks in international trade, we investigate the supply of network intermediation. We build a general‐equilibrium model in which agents with networks of foreign contacts either can use their networks themselves in support of production or can make their networks available for others to use and thereby can become network intermediaries. We use this model for comparative statics and welfare analysis. One welfare conclusion is that intermediaries may have inadequate incentives to maintain or to expand their networks, suggesting a rationale for the policies followed by some countries to encourage large‐scale trading companies.