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A Network Model of Price Dispersion

Pasini, Giacomo and Pin, Paolo and Weidenholzer, Simon A Network Model of Price Dispersion. [UNSPECIFIED]

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We analyze a model of price competition ? la Bertrand in a network environment. Firms only have a limited information on the structure of network: they know the number of potential customers they can attract and the degree distribution of customers. This incomplete information framework stimulates the use of Bayesian-Nash equilibrium. We find that, if there are customers only linked to one firm, but not all of them are, then an equilibrium in randomized strategies fails to exist. Instead, we find a symmetric equilibrium in randomized strategies. Finally, we test our results on US gasoline data. We find empirical evidence consistent with firms playing random strategies.

Uncontrolled Keywords: D43, D85, L11, Bertrand Competition, Bayesian- Nash Equilibrium, Mobility Index
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 27 Jun 2012 15:10
Last Modified: 17 Aug 2017 18:12

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