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The Value of Network Information: Assortative Mixing Makes the Difference

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Working paper
Author/s: 
Mohamed Belhaj, Frédéric Deroïan
Issue number: 
2016-18
Series: 
AMSE Working Papers
Publisher: 
Aix-Marseille School of Economics
Year: 
2016
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.
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