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Monopoly pricing of social goods

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  • Sääskilahti, Pekka

Abstract

We analyse the roles of social network topology and size on the monopoly pricing of network goods in a market, where consumers interact with each other and are characterised by their social relations. The size effect is the well-known network externalities phenomenon, while the topological effect has not been previously studied in this context. The topological effect works against, and dominates, the size effect in monopoly pricing by reducing the monopoly's capacity to extract consumer surplus. Under asymmetric information about consumer types, the monopoly prefers symmetric network topologies, but the social optimum is an asymmetric network.

Suggested Citation

  • Sääskilahti, Pekka, 2007. "Monopoly pricing of social goods," MPRA Paper 3526, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3526
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    1. repec:eee:gamebe:v:104:y:2017:i:c:p:568-594 is not listed on IDEAS
    2. Leduc, Matt V. & Jackson, Matthew O. & Johari, Ramesh, 2017. "Pricing and referrals in diffusion on networks," Games and Economic Behavior, Elsevier, vol. 104(C), pages 568-594.

    More about this item

    Keywords

    social relations; networks; coordination; monopoly;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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