Pricing in Information Orchestrators and Maximizing Stable Networks

Bernardo C. Lustosa (), Alberto L. Albertin () and Fernando Moreira ()
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Bernardo C. Lustosa: ClearSale S.A R. José de Oliveira Coutinho, 151 - Barra Funda, São Paulo SP 01144-020, Brazil
Alberto L. Albertin: Fundação Getúlio Vargas, Av. Nove de Julho, 2029, São Paulo SP 01313-001, Brazil
Fernando Moreira: University of Edinburgh Business School, 29 Buccleuch Place, Edinburgh EH8 9JS, UK

International Game Theory Review (IGTR), 2019, vol. 21, issue 03, 1-20

Abstract: In innovation networks based on information exchange, an orchestrating actor, or hub, captures information from peripheral actors, promotes innovation and then distributes it to the network in the form of added value. This paper identifies the pricing options proposed by the orchestrating hub that would result in the network’s stability and efficiency. Since all the companies in this ecosystem can be seen as rational agents, game theory is an appropriate framework for studying pricing as a mechanism to promote network stability. We analyze the equilibrium conditions in this context and conclude that the Nash equilibrium entails the network’s stability. Our findings indicate that, in order to maximize the innovation power of the network, the agents should be charged a price proportional to the financial benefit obtained by the net innovation. This study fills relevant gaps in the literature on monopolistic orchestrated innovation and the pricing structures of network connections.

Keywords: Innovation networks; network stability; game theory; Nash equilibrium; pricing (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S0219198918500135

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