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Price Setting on a Network

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  • Toomas Hinnosaar

Abstract

I study price setting within a network of interconnected monopolists. Some firms possess stronger commitment or bargaining power than others, enabling them to influence the pricing decisions of other firms. Although it is well‐understood that multiple marginalization reduces both total profits and social welfare, I show that strategic interactions within the network exacerbate the marginalization problem. Individual profits are proportional to a new measure of network centrality, defined by the equilibrium characterization. The results underscore the importance of network structure in policy considerations, such as mergers or trade policies.

Suggested Citation

  • Toomas Hinnosaar, 2025. "Price Setting on a Network," RAND Journal of Economics, RAND Corporation, vol. 56(4), pages 546-561, December.
    • Handle: RePEc:bla:randje:v:56:y:2025:i:4:p:546-561
    DOI: 10.1111/1756-2171.70035
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