Trading in networks: Theory and experiments
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Peer-reviewed
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Abstract
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. (JEL: C70, C71, C91, C92, D40)
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Journal Title
Journal of the European Economic Association
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Journal ISSN
1542-4766
1542-4774
1542-4774
Volume Title
15
Publisher
Oxford University Press (OUP)
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Sponsorship
Keynes Fund for Applied Research in Cambridge (Project: Experiments on Financial Networks)