Pricing in networks
AbstractThis 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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Date of creation: Oct 2008
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Social Networks; Network Externalities; Oligopolies;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-28 (All new papers)
- NEP-COM-2009-03-28 (Industrial Competition)
- NEP-IND-2009-03-28 (Industrial Organization)
- NEP-NET-2009-03-28 (Network Economics)
- NEP-SOC-2009-03-28 (Social Norms & Social Capital)
- NEP-URE-2009-03-28 (Urban & Real Estate Economics)
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