Competitive pricing strategies in social networks
Competitive pricing strategies in social networks
We study pricing strategies of competing firms selling heterogeneous products to consumers. Goods are substitutes and there are network externalities between neighboring consumers. In equilibrium, firms price discriminate based on the network positions and charge lower prices to more central consumers. We also show that, under some conditions, firms' equilibrium profits decrease when either the network becomes denser or network effects increase. In contrast, consumers always benefit from being more connected to each other. We determine the optimal network structure and compare uniform pricing and discriminatory pricing from the perspectives of firms and consumers.
672-705
Chen, Ying-Ju
ef98577f-7133-4fae-bae8-42ffb321c10d
Zenou, Yves
38bf0c72-462b-4c08-8fd1-ce365b0296dc
Zhou, Junjie
fc0f296f-3665-4af4-a263-195d53ddec2d
24 August 2018
Chen, Ying-Ju
ef98577f-7133-4fae-bae8-42ffb321c10d
Zenou, Yves
38bf0c72-462b-4c08-8fd1-ce365b0296dc
Zhou, Junjie
fc0f296f-3665-4af4-a263-195d53ddec2d
Chen, Ying-Ju, Zenou, Yves and Zhou, Junjie
(2018)
Competitive pricing strategies in social networks.
The Rand Journal of Economics, 49 (3), .
(doi:10.1111/1756-2171.12249).
Abstract
We study pricing strategies of competing firms selling heterogeneous products to consumers. Goods are substitutes and there are network externalities between neighboring consumers. In equilibrium, firms price discriminate based on the network positions and charge lower prices to more central consumers. We also show that, under some conditions, firms' equilibrium profits decrease when either the network becomes denser or network effects increase. In contrast, consumers always benefit from being more connected to each other. We determine the optimal network structure and compare uniform pricing and discriminatory pricing from the perspectives of firms and consumers.
Text
Competitive pricing_20180310-B
- Accepted Manuscript
More information
Accepted/In Press date: 13 March 2018
e-pub ahead of print date: 24 August 2018
Published date: 24 August 2018
Identifiers
Local EPrints ID: 419297
URI: http://eprints.soton.ac.uk/id/eprint/419297
ISSN: 0741-6261
PURE UUID: 2933d68c-5bd3-4871-a382-71aab1d848a4
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Date deposited: 10 Apr 2018 16:30
Last modified: 16 Mar 2024 06:26
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Author:
Ying-Ju Chen
Author:
Junjie Zhou
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