Strategic formation of production networks
arxiv(2024)
摘要
We provide a strategic model of the formation of production networks that
subsumes the standard general equilibrium approach. The objective of firms in
our setting is to choose their supply relationships so as to maximize their
profit at the general equilibrium that unfolds. We show that this objective is
equivalent to the maximization by the firms of their eigenvector centrality in
the production network. As is common in network formation games based on
centrality, there are multiple Nash equilibria in our setting. We have
investigated the characteristics and the social efficiency of these equilibria
in a stylized version of our model representing international trade networks.
We show that the impact of network structure on social welfare is firstly
determined by a trade-off between costs of increasing process complexity and
positive spillovers on productivity induced by the diversification of the input
mix. We further analyze a variant of our model that accounts for the risks of
disruption of supply relationships. In this setting, we characterize how social
welfare depends on the structure of the production network, the spatial
distribution of risks, and the process of shock aggregation in supply chains.
We finally show that simple trade policies characterized by sets of links that
are either prevented or catalyzed can be a powerful equilibrium selection
device.
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