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Prices in Networks

Author

Listed:
  • Tan, Hi-Lin

Abstract

When there is strategic complementarity of consumption between neighbors in a social network, we find that certain consumers may have a bigger impact than other consumers on the market demand and therefore the equilibrium price. The influence that a particular consumer has on the market demand depends on the network structure and the consumer’s location in the network. This analysis may, for example, shed light on the segment of consumers that should be the target of selective advertisements or promotions.

Suggested Citation

  • Tan, Hi-Lin, 2006. "Prices in Networks," MPRA Paper 62984, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62984
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    File URL: https://mpra.ub.uni-muenchen.de/62984/1/MPRA_paper_62984.pdf
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    References listed on IDEAS

    as
    1. Karni, Edi & Levin, Dan, 1994. "Social Attributes and Strategic Equilibrium: A Restaurant Pricing Game," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 822-840, August.
    2. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-116, March.
    3. Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001. "Price competition when consumer behavior is characterized by conformity or vanity," Journal of Public Economics, Elsevier, vol. 80(3), pages 385-408, June.
    4. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    5. Ed Hopkins & Tatiana Kornienko, 2004. "Running to Keep in the Same Place: Consumer Choice as a Game of Status," American Economic Review, American Economic Association, vol. 94(4), pages 1085-1107, September.
    6. Corneo, Giacomo & Jeanne, Olivier, 1997. "Conspicuous consumption, snobbism and conformism," Journal of Public Economics, Elsevier, vol. 66(1), pages 55-71, October.
    7. Emanuela Randon, "undated". "Multiple Equilibria with Externalities," Discussion Papers 04/09, Department of Economics, University of York.
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    Cited by:

    1. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 90-119, March.

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    More about this item

    Keywords

    Walrasian Equilibrium; Strategic Complementarity; Networks;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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