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Comparative statics and centrality measures in oligopolies with interdependent preferences

Author

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  • Marco F. Boretto
  • Fausto Cavalli
  • Ahmad Naimzada

Abstract

Considering the Cournot oligopoly with interdependent preferences proposed in [5], we analyze the effects of a change in the network of social interactions. Reconsidering some of the main centrality measures proposed in the literature, we show how intercentrality, Bonacich and Friedkin-Johnsen centrality measures can be related in a network described by a general matrix of interaction. This allows showing under what conditions a firm can benefit, in terms of equilibrium performance, from a change in the weight of interaction with respect to one of its competitors. Extending the approach to the study of a uniform change in the behavior of all the firms, we show that it is collectively beneficial only if the structure of social interaction is characterized by a sufficient degree of homogeneity in terms of weight distributions.

Suggested Citation

  • Marco F. Boretto & Fausto Cavalli & Ahmad Naimzada, 2021. "Comparative statics and centrality measures in oligopolies with interdependent preferences," Working Papers 464, University of Milano-Bicocca, Department of Economics, revised Mar 2021.
    • Handle: RePEc:mib:wpaper:464
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    References listed on IDEAS

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    1. Matthew J. Clayton & Bjorn N. Jorgensen, 2005. "Optimal Cross Holding with Externalities and Strategic Interactions," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1505-1522, July.
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    4. Marco F. Boretto & Fausto Cavalli & Ahmad Naimzada, 2021. "Oligopoly model with interdependent preferences: existence and uniqueness of Nash equilibrium," Working Papers 462, University of Milano-Bicocca, Department of Economics, revised Mar 2021.
    5. Friedman, Daniel & Huck, Steffen & Oprea, Ryan & Weidenholzer, Simon, 2015. "From imitation to collusion: Long-run learning in a low-information environment," Journal of Economic Theory, Elsevier, vol. 155(C), pages 185-205.
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    More about this item

    Keywords

    Cournot Game; Preference interdependence; Network; Centrality measures; Comparative statics.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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