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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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File URL: http://hal.archives-ouvertes.fr/docs/00/35/63/56/PDF/cahier_de_recherche_2008-31.pdf
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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

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00356356/en/
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Related research

Keywords: Social Networks; Network Externalities; Oligopolies;

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References

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  1. 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.
  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, vol. 51(4), pages 1159-1174, November.
  3. Banerji, A. & Dutta, Bhaskar, 2009. "Local network externalities and market segmentation," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 605-614, September.
  4. Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
  5. Andrea Galeotti & Sanjeev Goyal, 2007. "A Theory of Strategic Diffusion," Economics Discussion Papers 635, University of Essex, Department of Economics.
  6. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2006. "Who's Who in Networks. Wanted: The Key Player," Econometrica, Econometric Society, vol. 74(5), pages 1403-1417, 09.
  7. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
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Citations

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Cited by:
  1. Christian Ghiglino & Sanjeev Goyal, 2008. "Keeping up with the neighbours: social interaction in a market economy," Economics Discussion Papers 655, University of Essex, Department of Economics.
  2. Mohamed Belhaj & Frédéric Deroian, 2010. "Endogenous effort in communication networks under strategic complementarity," International Journal of Game Theory, Springer, vol. 39(3), pages 391-408, July.

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