Pricing in social networks. (English) Zbl 1281.91077
Summary: We analyze the problem of optimal monopoly pricing in social networks where agents care about consumption or prices of their neighbors. We characterize the relation between optimal prices and consumers’ centrality in the social network. This relation depends on the market structure (monopoly vs. oligopoly) and on the type of externalities (consumption versus price). We identify two situations where the monopolist does not discriminate across nodes in the network (linear monopoly with consumption externalities and local monopolies with price externalities). We also analyze the robustness of the analysis with respect to changes in demand, and the introduction of bargaining between the monopolist and the consumer.
MSC:
| 91B24 | Microeconomic theory (price theory and economic markets) |
| 91B54 | Special types of economic markets (including Cournot, Bertrand) |
| 91D30 | Social networks; opinion dynamics |
| 91B42 | Consumer behavior, demand theory |
| 91B26 | Auctions, bargaining, bidding and selling, and other market models |
Keywords:
social networks; monopoly pricing; network externalities; reference price; centrality measuresReferences:
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