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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)

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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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Paper provided by HAL in its series Working Papers with number hal-00356356_v1.

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Date of creation: Oct 2008
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Handle: RePEc:hal:wpaper:hal-00356356_v1

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Related research
Keywords: Social Networks; Network Externalities; Oligopolies;

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  1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring. [Downloadable!] (restricted)
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  2. 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. [Downloadable!] (restricted)
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This page was last updated on 2009-11-28.

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