Pricing in social networks

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Article
Author/s: 
Francis Bloch and Nicolas Quérou
Games and Economic Behavior
Issue number: 
80
Publisher: 
Elsevier
Year: 
2013
Journal pages: 
243–261
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 consumersʼ 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.
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