Abstract
We study the interplay between partner selection, firm resources, and resource concentration in the Thoroughbred horse industry, focusing on seller-intermediary relationships and a given portfolio of products. Theory predicts that partners are more likely to be selected for high-quality resources. However, when an upstream partner has multiple goods to allocate, the focal partner may bundle high-quality resources with low-quality resources. We analyze this problem using a dataset of breeder-consignment relationships formed from 2005 to 2008 to sell horses. Our modeling approach incorporates the selection of partner decisions, allowing us to account for the diversity of goods for each side and recover the cost of transactions. Our results indicate that differences in resource portfolios result in an increased concentration of business with intermediaries.
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