Abstract
We examine the formation of buyer-seller links in an environment where exchange can only take place if such a link exists. Sellers can produce products of different qualities and multiple sellers of uniform or mixed quality can form an association to pool their customers setting uniform prices (called a sellers’ association). Buyers may form a trade link with either an individual seller or with a sellers’ association. We show which buyer-seller links will form and find the set of links (or networks) which are stable. Additionally, we show how these buyer-seller networks influence the price paid for the good or service exchanged. Specifically, we give conditions on the network for which the seller (or sellers’ association) is guaranteed a non-negligible positive payoff and conditions on the network for which the buyer is guaranteed a non-negligible positive surplus.