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Trading in networks: Theory and experiments

Accepted version
Peer-reviewed

Type

Article

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Authors

Choi, S 
Galeotti, A 

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)

Description

Keywords

intermediation, competition, market power, double marginalization

Journal Title

Journal of the European Economic Association

Conference Name

Journal ISSN

1542-4766
1542-4774

Volume Title

15

Publisher

Oxford University Press (OUP)
Sponsorship
Keynes Fund for Applied Research in Cambridge (Project: Experiments on Financial Networks)