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The Value of Network Information: Assortative Mixing Makes the Difference

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Abstract

We study the value of network information in a context of monopoly pricing in the presence of local network externalities. We compare a setting in which all players, i.e. the monopoly and consumers, know the network structure and consumers' private preferences with a setting in which players only know the joint distribution of preferences, in-degrees and out-degrees. We give conditions under which network information increases profit or/and consumer surplus. The analysis reveals the crucial role played by four properties: degree assortativity, homophily (in preferences), preference-degree assortativity and preference-Bonacich centrality assortativity.

Suggested Citation

  • Mohamed Belhaj & Frédéric Deroïan, 2016. "The Value of Network Information: Assortative Mixing Makes the Difference," AMSE Working Papers 1618, Aix-Marseille School of Economics, France, revised 11 May 2016.
    • Handle: RePEc:aim:wpaimx:1618
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    Cited by:

    1. Panebianco, Fabrizio & Verdier, Thierry & Zenou, Yves, 2016. "Innovation, Pricing and Targeting in Networks," CEPR Discussion Papers 11398, C.E.P.R. Discussion Papers.
    2. Belhaj, Mohamed & Deroïan, Frédéric & Safi, Shahir, 2023. "Targeting in networks under costly agreements," Games and Economic Behavior, Elsevier, vol. 140(C), pages 154-172.
    3. Zenou, Yves & Chen, Ying-Ju & Zhou, Junjie, 2020. "Network Topology and Market Structure," CEPR Discussion Papers 14495, C.E.P.R. Discussion Papers.
    4. Chen, Ying-Ju & Zenou, Yves & Zhou, Junjie, 2022. "The impact of network topology and market structure on pricing," Journal of Economic Theory, Elsevier, vol. 204(C).

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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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