From Centrality Discounts to Centrality Premia: Interoperability and Platform Competition in Social Networks

Weiming Li, Jing Sun, Xinxi Song and Bin Wu

Papers from arXiv.org

Abstract: We study how interoperability reshapes competitive price discrimination when consumers are embedded in a social network. Two differentiated platforms set personalized prices; consumers benefit from neighbors' consumption of the same platform and, under interoperability, of the rival. Equilibrium prices obtain in closed form for arbitrary networks and contain a network-position term, proportional to Katz-Bonacich centrality, whose sign is determined by whether interoperability exceeds product substitutability. Below this threshold, platforms contest central consumers and grant centrality discounts; above it, central consumers become gateways to a shared cross-platform network and pay premia; at the threshold, prices are independent of network position. Interoperability softens price competition, can make platforms favor denser consumer networks, and reverses which side of the market gains from price discrimination.

Date: 2026-07
New Economics Papers: this item is included in nep-mic and nep-pay
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