Price Setting on a Network

Toomas Hinnosaar

No 18073, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Most products are produced and sold by supply chain networks, where an interconnected network of producers and intermediaries set prices to maximize their profits. I show that there exists a unique equilibrium in a price-setting game on a network. The key distortion reducing both total profits and social welfare is multiple-marginalization, which is magnified by strategic interactions. Individual profits are proportional to influentiality, a new measure of network centrality defined by the equilibrium characterization. The results emphasize the importance of the network structure when considering policy questions such as mergers or trade policies.

JEL-codes: C72 D43 L14 (search for similar items in EconPapers)
Date: 2023-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18073 (application/pdf)

Related works:
Working Paper: Price setting on a network (2020)
Working Paper: Price Setting on a Network (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:18073

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18073

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().