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Pricing in networks

Author

Listed:
  • Francis Bloch

    () (Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • 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.

Suggested Citation

  • Francis Bloch & Nicolas Quérou, 2008. "Pricing in networks," Working Papers hal-00356356, HAL.
  • Handle: RePEc:hal:wpaper:hal-00356356
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00356356
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    File URL: https://hal.archives-ouvertes.fr/hal-00356356/document
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    References listed on IDEAS

    as
    1. Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
    2. De Martí, Joan & Zenou, Yves, 2009. "Social Networks," CEPR Discussion Papers 7599, C.E.P.R. Discussion Papers.
    3. 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.
    4. 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.
    5. Banerji, A. & Dutta, Bhaskar, 2009. "Local network externalities and market segmentation," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 605-614, September.
    6. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 90-119, March.
    7. Sanjeev Goyal & Andrea Galeotti, 2007. "A Theory of Strategic Diffusion," Working Papers 2007.70, Fondazione Eni Enrico Mattei.
    8. Galeotti, Andrea & Goyal, Sanjeev, 2007. "A Theory of Strategic Diffusion," Economics Discussion Papers 2983, University of Essex, Department of Economics.
    9. 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.
    10. 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. Mohamed Belhaj & Frédéric Deroian, 2010. "Endogenous effort in communication networks under strategic complementarity," International Journal of Game Theory, Springer;Game Theory Society, vol. 39(3), pages 391-408, July.
    2. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 90-119, 03.

    More about this item

    Keywords

    Social Networks; Network Externalities; Oligopolies; Réseaux sociaux; externalités de réseau; oligopoles;

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