EconPapers    
Economics at your fingertips  
 

Monopoly pricing and diffusion of social network goods

Euncheol Shin

Games and Economic Behavior, 2017, vol. 102, issue C, 162-178

Abstract: I present a model of dynamic pricing and diffusion of a network good sold by a monopolist. In the model, the network good is a subscription social network good. This means that in each period, each consumer has to pay a subscription price to use the good, and the utility derived from subscribing to the good increases as more of her neighboring consumers subscribe. Consumers myopically optimize their subscription decisions, and the monopolist chooses a sequence of subscription prices that maximizes his discounted sum of per-period profits. Three main results emerge. First, I characterize a unique steady state of the monopoly market. Second, I find that optimal sequences of subscription prices oscillate around the subscription price at the steady state. Third, I analyze how changes in the monopolist's discount factor and the density of the social network affect the subscription price, subscription rate, and deadweight loss at the steady state.

Keywords: Degree distribution; Diffusion; Monopoly pricing; Social networks; Social network good (search for similar items in EconPapers)
JEL-codes: D42 L12 L14 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825616301440
Full text for ScienceDirect subscribers only

Related works:
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:eee:gamebe:v:102:y:2017:i:c:p:162-178

DOI: 10.1016/j.geb.2016.12.004

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-19
Handle: RePEc:eee:gamebe:v:102:y:2017:i:c:p:162-178