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Pricing in networks

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Author Info

  • Francis Bloch

    (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)

  • Nicolas Quérou

    (School of Management and Economics - Queen's University of Belfast)

Abstract

This paper studies optimal pricing in networks in the presence of local consumption or price externalities. It analyzes the relation between prices and nodal centrality measures. Using an asymptotic approach, it shows that the ranking of optimal prices and strategies can be reduced to the lexicographic ranking of a specific vector of nodal characteristics. In particular, this result shows that with positive consumption externalities, prices are higher at nodes with higher degree, and with relative price externalities, prices are higher at nodes which have more neighbors of smaller degree.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00356356.

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Date of creation: Oct 2008
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Handle: RePEc:hal:wpaper:hal-00356356

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Related research

Keywords: Social Networks; Network Externalities; Oligopolies;

References

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  1. Coralio Ballester & Antoni Calvo-Armengol & Yves Zenou, 2005. "Who's Who in Networks. Wanted: the Key Player," NajEcon Working Paper Reviews, www.najecon.org 666156000000000586, www.najecon.org.
  2. Andrea Galeotti, 2010. "Talking, Searching, And Pricing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1159-1174, November.
  3. Banerji, A & Dutta, Bhaskar, 2005. "Local Network Externalities and Market Segmentation," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 725, University of Warwick, Department of Economics.
  4. Sanjeev Goyal & Andrea Galeotti, 2007. "A Theory of Strategic Diffusion," Working Papers, Fondazione Eni Enrico Mattei 2007.70, Fondazione Eni Enrico Mattei.
  5. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2008. "Network Games," Economics Working Papers, European University Institute ECO2008/07, European University Institute.
    • Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 218-244.
  6. Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
  7. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, Elsevier, vol. 135(1), pages 478-494, July.
  8. De Martí, Joan & Zenou, Yves, 2009. "Social Networks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7599, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, MIT Press, vol. 8(1), pages 90-119, 03.
  2. Mohamed Belhaj & Frédéric Deroïan, 2008. "Endogenous efforts on communication networks under strategic complementarity," Working Papers, HAL halshs-00339159, HAL.

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