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Trade and Market Thickness: Effects on Organizations

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  • John McLaren

    (University of Virginia and NBER,)

Abstract

Globalization, by raising the number of buyers available to each seller and the number of sellers available to each buyer, raises the thickness, or the effective number of participants, of every market. Market thickness can have subtle effects on incentives and organizations, alleviating hold-up problems, resulting in less vertical integration, more informal contracting, and more cooperative and innovative relationships with subcontractors. However, it can also weaken long-run relationships, distorting relationship-specific investments and risk-sharing. This paper surveys the theory and empirical evidence, indicating when market thickness helps and when it hurts. (JEL: F15, L14, L22) Copyright (c) 2003 The European Economic Association.

Suggested Citation

  • John McLaren, 2003. "Trade and Market Thickness: Effects on Organizations," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 328-336, 04/05.
    • Handle: RePEc:tpr:jeurec:v:1:y:2003:i:2-3:p:328-336
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    Citations

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    Cited by:

    1. Buehler, Stefan & Burghardt, Dirk, 2013. "Globalization and Vertical Structure: An Empirical Investigation," Economics Working Paper Series 1310, University of St. Gallen, School of Economics and Political Science.
    2. Giulio Cainelli & Massimiliano Mazzanti & Sandro Montresor, 2012. "Environmental Innovations, Local Networks and Internationalization," Industry and Innovation, Taylor & Francis Journals, vol. 19(8), pages 697-734, November.
    3. Roger Strange, 2011. "The outsourcing of primary activities: theoretical analysis and propositions," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(2), pages 249-269, May.
    4. Agostino Manduchi & Lucia Naldi, 2014. "Clusters and conglomerates in the media industry," Chapters, in: Charlie Karlsson & Börje Johansson & Roger R. Stough (ed.), Agglomeration, Clusters and Entrepreneurship, chapter 11, pages 252-266, Edward Elgar Publishing.
    5. Marianna Belloc, 2006. "Institutions and International Trade: A Reconsideration of Comparative Advantage," Journal of Economic Surveys, Wiley Blackwell, vol. 20(1), pages 3-26, February.
    6. Carsten Eckel, 2009. "International trade, flexible manufacturing, and outsourcing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1449-1472, November.
    7. Richard Fabling & David C Maré & Philip Stevens, 2022. "Migration and firm-level productivity," Working Papers 2022/01, New Zealand Productivity Commission.
    8. Xinyi Lyu & Tiaojun Xiao & Jingquan Li, 2024. "Evolution of direct network effects: A perspective of market thickness of an online freight platform," Electronic Markets, Springer;IIM University of St. Gallen, vol. 34(1), pages 1-16, December.
    9. Giulioni, Gianfranco & Bucciarelli, Edgardo, 2011. "Agents’ ability to manage information in centralized markets: Comparing two wholesale fish markets," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 34-49.
    10. Aekapol Chongvilaivan & Jung Hur, 2012. "Trade Openness and Vertical Integration: Evidence from the U.S. Manufacturing Sector," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1242-1264, April.
    11. Arnon Tonmukayakul & Martin Weiss, 2008. "A study of secondary spectrum use using agent-based computational economics," Netnomics, Springer, vol. 9(2), pages 125-151, October.
    12. Avcioglu, Sahin & Karabay, Bilgehan, 2019. "Search efficiency, wage dynamics and welfare," Economic Modelling, Elsevier, vol. 83(C), pages 270-286.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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