Trading in Networks: Theory and Experiments
Friday 16th May 2014
CINET:
1408
Cho, S., Galeotti, A. and Goyal, S.
We propose a model of posted prices in networks. The model maps traditional concepts of market power,
competition and double marginalization into networks, allowing for the study of pricing in complex
structures of intermediation such as supply chains, transportation and communication networks and
financial brokerage. We provide a complete characterization of equilibrium prices. Our experiments
complement our theoretical work and point to node criticality as an organizing principle for understanding
pricing, efficiency and the division of surplus in networked markets.
Keywords
Intermediation
competition
market power
double marginalization
C70
C71
C91
C92
D40
Themes
networks