IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2508.17301.html
   My bibliography  Save this paper

Price Regulation with Spillovers

Author

Listed:
  • Chengqing Li
  • Junjie Zhou

Abstract

We examine price regulation for monopolists in networks with demand spillovers. The Pareto frontier of the profit-surplus set is characterized using a centrality-based price family. Under typical price regulation policies, regulated outcomes are generically Pareto inefficient at fixed spillover levels but become neutral as spillovers grow, with relative profit loss and surplus changes vanishing. Welfare impacts of banning price discrimination under strong spillovers depend solely on the correlation between intrinsic values and network summary statistics. In networks with two node types (e.g., coreperiphery or complete bipartite), intrinsic value averages across node types suffice for welfare comparisons.

Suggested Citation

  • Chengqing Li & Junjie Zhou, 2025. "Price Regulation with Spillovers," Papers 2508.17301, arXiv.org.
    • Handle: RePEc:arx:papers:2508.17301
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2508.17301
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yang Zhang & Ying-Ju Chen, 2020. "Optimal Nonlinear Pricing in Social Networks Under Asymmetric Network Information," Operations Research, INFORMS, vol. 68(3), pages 818-833, May.
    2. Ying‐Ju Chen & Yves Zenou & Junjie Zhou, 2018. "Competitive pricing strategies in social networks," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 672-705, September.
    3. Ushchev, Philip & Zenou, Yves, 2018. "Price competition in product variety networks," Games and Economic Behavior, Elsevier, vol. 110(C), pages 226-247.
    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).
    5. Maxime C. Cohen & Adam N. Elmachtoub & Xiao Lei, 2022. "Price Discrimination with Fairness Constraints," Management Science, INFORMS, vol. 68(12), pages 8536-8552, December.
    6. Aoyagi, Masaki, 2018. "Bertrand competition under network externalities," Journal of Economic Theory, Elsevier, vol. 178(C), pages 517-550.
    7. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    8. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    9. 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, September.
    10. Mark Armstrong & John Vickers, 2018. "Multiproduct Pricing Made Simple," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1444-1471.
    11. Jiali Huang & Ankur Mani & Zizhuo Wang, 2022. "The Value of Price Discrimination in Large Social Networks," Management Science, INFORMS, vol. 68(6), pages 4454-4477, June.
    12. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-247, March.
    13. Bloch, Francis & Quérou, Nicolas, 2013. "Pricing in social networks," Games and Economic Behavior, Elsevier, vol. 80(C), pages 243-261.
    14. Ozan Candogan & Kostas Bimpikis & Asuman Ozdaglar, 2012. "Optimal Pricing in Networks with Externalities," Operations Research, INFORMS, vol. 60(4), pages 883-905, August.
    15. Giacomo De Giorgi & Anders Frederiksen & Luigi Pistaferri, 2020. "Consumption Network Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 130-163.
    16. Banerji, A. & Dutta, Bhaskar, 2009. "Local network externalities and market segmentation," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 605-614, September.
    17. Wilfred Amaldoss & Chuan He, 2018. "Reference-Dependent Utility, Product Variety, and Price Competition," Management Science, INFORMS, vol. 64(9), pages 4302-4316, September.
    18. Krishna Dasaratha & Benjamin Golub & Anant Shah, 2024. "Incentive Design with Spillovers," Papers 2411.08026, arXiv.org.
    19. Andrea Galeotti & Benjamin Golub & Sanjeev Goyal, 2020. "Targeting Interventions in Networks," Econometrica, Econometric Society, vol. 88(6), pages 2445-2471, November.
    20. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    21. Joan Robinson, 1969. "The Economics of Imperfect Competition," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-15320-6, July.
    22. Itay P. Fainmesser & Andrea Galeotti, 2016. "Pricing Network Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 165-198.
    23. repec:hal:pseose:hal-01013603 is not listed on IDEAS
    24. Filipp Ushchev & Yves Zenou, 2018. "Price competition in product variety networks," ULB Institutional Repository 2013/387738, ULB -- Universite Libre de Bruxelles.
    25. Li, Jian & Zhou, Junjie & Chen, Ying-Ju, 2022. "The limit of targeting in networks," Journal of Economic Theory, Elsevier, vol. 201(C).
    26. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    27. Mark Armstrong & John Vickers, 1991. "Welfare Effects of Price Discrimination by a Regulated Monopolist," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 571-581, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. Duan, Yongrui & Feng, Yixuan, 2021. "Optimal pricing in social networks considering reference price effect," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    3. Ying‐Ju Chen & Yves Zenou & Junjie Zhou, 2018. "Competitive pricing strategies in social networks," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 672-705, September.
    4. Kor, Ryan & Zhou, Junjie, 2023. "Multi-activity influence and intervention," Games and Economic Behavior, Elsevier, vol. 137(C), pages 91-115.
    5. Yang Zhang & Ying-Ju Chen, 2020. "Optimal Nonlinear Pricing in Social Networks Under Asymmetric Network Information," Operations Research, INFORMS, vol. 68(3), pages 818-833, May.
    6. Panebianco, Fabrizio & Verdier, Thierry & Zenou, Yves, 2016. "Innovation, Pricing and Targeting in Networks," CEPR Discussion Papers 11398, C.E.P.R. Discussion Papers.
    7. Jeon, Doh-Shin & Lefouili, Yassine & Li, Yaxin & Simcoe, Timothy, 2023. "Network Centrality and Device Ecosystems," TSE Working Papers 23-1468, Toulouse School of Economics (TSE), revised Jan 2025.
    8. Ryo Itoh & Zonghui Li, 2021. "Effects of dual networks on tax strategies: geography and transaction," The Japanese Economic Review, Springer, vol. 72(1), pages 97-128, January.
    9. Zenou, Yves & Chen, Ying-Ju & Zhou, Junjie, 2020. "Network Topology and Market Structure," CEPR Discussion Papers 14495, C.E.P.R. Discussion Papers.
    10. Ostrizek, Franz & Sartori, Elia, 2023. "Screening while controlling an externality," Games and Economic Behavior, Elsevier, vol. 139(C), pages 26-55.
    11. Elias Carroni & Paolo Pin & Simone Righi, 2020. "Bring a Friend! Privately or Publicly?," Management Science, INFORMS, vol. 66(5), pages 2269-2290, May.
    12. Jullien, Bruno & Pavan, Alessandro & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," TSE Working Papers 21-1238, Toulouse School of Economics (TSE).
    13. Ningyuan Chen & Ying-Ju Chen, 2021. "Duopoly Competition with Network Effects in Discrete Choice Models," Operations Research, INFORMS, vol. 69(2), pages 545-559, March.
    14. Bloch, Francis & Shabayek, Shaden, 2023. "Targeting in social networks with anonymized information," Games and Economic Behavior, Elsevier, vol. 141(C), pages 380-402.
    15. Tavasoli, Ali & Fazli, Mehrdad & Ardjmand, Ehsan & Young, William A. & Shakeri, Heman, 2023. "Competitive pricing under local network effects," European Journal of Operational Research, Elsevier, vol. 311(2), pages 545-566.
    16. Jadbabaie, Ali & Kakhbod, Ali, 2019. "Optimal contracting in networks," Journal of Economic Theory, Elsevier, vol. 183(C), pages 1094-1153.
    17. Rui Zheng & Biying Shou & Yingju Chen, 2023. "Differential pricing in social networks with strategic consumers," Production and Operations Management, Production and Operations Management Society, vol. 32(8), pages 2638-2655, August.
    18. Masaki Aoyagi, 2020. "Connecting Heterogeneous Agents under Incomplete Information," ISER Discussion Paper 1089, Institute of Social and Economic Research, The University of Osaka.
    19. Ushchev, Philip & Zenou, Yves, 2018. "Price competition in product variety networks," Games and Economic Behavior, Elsevier, vol. 110(C), pages 226-247.
    20. Sun, Yang & Zhao, Wei, 2024. "Relative performance evaluation in spillover networks," Games and Economic Behavior, Elsevier, vol. 145(C), pages 285-311.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2508.17301. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.