Cho, S., Galeotti, A. and Goyal, S.

Trading in Networks: Theory and Experiments

WP Number: 1408

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.

Keywords: Intermediation, competition, market power, double marginalization

JEL Codes: C70 C71 C91 C92 D40

Author links: Sanjeev Goyal  

PDF: wp1408.pdf

Open Access Link: 10.17863/CAM.5663

Keynes Fund Project(s):
Experiments on Financial Networks (JHLB)  
Experiments on 'Networked Markets' (JHLR)  

Theme: networks

Published Version of Paper: Trading in Networks: Theory and Experiments, Choi, S., Galeotti, A and Goyal, S., Journal of the European Economic Association (2017)