IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/halshs-01314954.html
   My bibliography  Save this paper

The Value of Network Information: Assortative Mixing Makes the Difference

Author

Listed:
  • Mohamed Belhaj

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Frédéric Deroïan

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study the value of network information in a context of monopoly pricing in the presence of local network externalities. We compare a setting in which all players, i.e. the monopoly and consumers, know the network structure and consumers' private preferences with a setting in which players only know the joint distribution of preferences, in-degrees and out-degrees. We give conditions under which network information increases profit or/and consumer surplus. The analysis reveals the crucial role played by four properties: degree assortativity, homophily (in preferences), preference-degree assortativity and preference-Bonacich centrality assortativity.

Suggested Citation

  • Mohamed Belhaj & Frédéric Deroïan, 2016. "The Value of Network Information: Assortative Mixing Makes the Difference," Working Papers halshs-01314954, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01314954
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01314954
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-01314954/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bramoullé, Yann & Currarini, Sergio & Jackson, Matthew O. & Pin, Paolo & Rogers, Brian W., 2012. "Homophily and long-run integration in social networks," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1754-1786.
    2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    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. Antonio Cabrales & Piero Gottardi & Fernando Vega-Redondo, 2017. "Risk Sharing and Contagion in Networks," The Review of Financial Studies, Society for Financial Studies, vol. 30(9), pages 3086-3127.
    5. 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.
    6. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    7. Gary Charness & Francesco Feri & Miguel A. Meléndez‐Jiménez & Matthias Sutter, 2014. "Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection," Econometrica, Econometric Society, vol. 82, pages 1615-1670, September.
    8. Matthew O. Jackson & Leeat Yariv, 2007. "Diffusion of Behavior and Equilibrium Properties in Network Games," American Economic Review, American Economic Association, vol. 97(2), pages 92-98, May.
    9. Bloch, Francis & Quérou, Nicolas, 2013. "Pricing in social networks," Games and Economic Behavior, Elsevier, vol. 80(C), pages 243-261.
    10. Sergio Currarini & Matthew O. Jackson & Paolo Pin, 2009. "An Economic Model of Friendship: Homophily, Minorities, and Segregation," Econometrica, Econometric Society, vol. 77(4), pages 1003-1045, July.
    11. Sundararajan Arun, 2008. "Local Network Effects and Complex Network Structure," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-37, January.
    12. Acemoglu, Daron & Malekian, Azarakhsh & Ozdaglar, Asu, 2016. "Network security and contagion," Journal of Economic Theory, Elsevier, vol. 166(C), pages 536-585.
    13. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    14. Kets, Willemien, 2011. "Robustness of equilibria in anonymous local games," Journal of Economic Theory, Elsevier, vol. 146(1), pages 300-325, January.
    15. 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.
    16. repec:hal:pseose:hal-01013603 is not listed on IDEAS
    17. Arun Sundararajan, 2004. "Local Network Effects and Network Structure," Industrial Organization 0412011, University Library of Munich, Germany.
    18. Matthew O. Jackson & Brian W. Rogers, 2007. "Meeting Strangers and Friends of Friends: How Random Are Social Networks?," American Economic Review, American Economic Association, vol. 97(3), pages 890-915, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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. Belhaj, Mohamed & Deroïan, Frédéric & Safi, Shahir, 2023. "Targeting in networks under costly agreements," Games and Economic Behavior, Elsevier, vol. 140(C), pages 154-172.
    3. Zenou, Yves & Chen, Ying-Ju & Zhou, Junjie, 2020. "Network Topology and Market Structure," CEPR Discussion Papers 14495, C.E.P.R. Discussion Papers.
    4. Panebianco, Fabrizio & Verdier, Thierry & Zenou, Yves, 2016. "Innovation, Pricing and Targeting in Networks," CEPR Discussion Papers 11398, C.E.P.R. Discussion Papers.

    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. Belhaj, Mohamed & Deroïan, Frédéric, 2021. "The value of network information: Assortative mixing makes the difference," Games and Economic Behavior, Elsevier, vol. 126(C), pages 428-442.
    2. 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).
    3. Jadbabaie, Ali & Kakhbod, Ali, 2019. "Optimal contracting in networks," Journal of Economic Theory, Elsevier, vol. 183(C), pages 1094-1153.
    4. Jackson, Matthew O. & Zenou, Yves, 2015. "Games on Networks," Handbook of Game Theory with Economic Applications,, Elsevier.
    5. 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.
    6. Elias Carroni & Paolo Pin & Simone Righi, 2020. "Bring a Friend! Privately or Publicly?," Management Science, INFORMS, vol. 66(5), pages 2269-2290, May.
    7. de Marti, Joan & Zenou, Yves, 2009. "Social Networks," Working Paper Series 816, Research Institute of Industrial Economics.
    8. Duan, Yongrui & Feng, Yixuan, 2021. "Optimal pricing in social networks considering reference price effect," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    9. Sanjeev Goyal, 2015. "Networks in Economics: A Perspective on the Literature," Cambridge Working Papers in Economics 1548, Faculty of Economics, University of Cambridge.
    10. Zhang, Yang & He, Longfei, 2021. "Theory and experiments on network games of public goods: inequality aversion and welfare preference," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 326-347.
    11. Allouch, Nizar, 2017. "The cost of segregation in (social) networks," Games and Economic Behavior, Elsevier, vol. 106(C), pages 329-342.
    12. Ostrizek, Franz & Sartori, Elia, 2023. "Screening while controlling an externality," Games and Economic Behavior, Elsevier, vol. 139(C), pages 26-55.
    13. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2017. "The Economic Consequences of Social-Network Structure," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 49-95, March.
    14. 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.
    15. Panebianco, Fabrizio & Verdier, Thierry & Zenou, Yves, 2016. "Innovation, Pricing and Targeting in Networks," CEPR Discussion Papers 11398, C.E.P.R. Discussion Papers.
    16. Ming Hu & Zizhuo Wang & Yinbo Feng, 2020. "Information Disclosure and Pricing Policies for Sales of Network Goods," Operations Research, INFORMS, vol. 68(4), pages 1162-1177, July.
    17. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 218-244.
    18. Shin, Euncheol, 2021. "Social network formation and strategic interaction in large networks," Mathematical Social Sciences, Elsevier, vol. 111(C), pages 34-54.
    19. 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.
    20. 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.

    More about this item

    Keywords

    monopoly; network effects; price discrimination; Bonacich centrality; network information; degree assortativity; homophily; preference-degree assortativity; preference-Bonacich centrality assortativity;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

    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:hal:wpaper:halshs-01314954. 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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.