This project builds a new model of economic exchange: networks, rather than markets, of buyers and sellers. It begins with the empirically motivated premise that a buyer and a seller must have a relationship, a `link` to exchange goods. Networks-buyers and sellers and a pattern of links that connect them-are a common exchange environment. The project examines why agents may form networks and develops a methodology to study network structures. The model developed captures the characteristics of a variety of industries, including engineering and electronics subcontracting and apparel. This research promises to advance the economic theory of networks and exchange institutions. The arguments developed in the project can be used to study any bipartite setting including supervisory hierarchies and international trading blocs. The theory will also allow a comparison of networks to alternative exchange institutions such as vertical integration and anonymous markets. The investigator is junior faculty in a critical stage in her career and this project involves a large, new area of research using new techniques. To make an investment of this size early in a career involves some risk, since the full payoff is realized only after a number of years. The potential of the project, however, in terms of new theory, results, and publications is quite large. The opportunity to devote time now to the research is pivotal for the investigator's tenure case and future in scientific research.
