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Title:A network model of price dispersion PDF Logo
Authors:Pasini, Giacomo
Pin, Paolo
Weidenholzer, Simon
Issue Date:2008
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: CTN, Coalition theory network 2008,28
Abstract:We analyze a model of price competition รก 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.
Subjects:Bertrand Competition
Bayesian- Nash Equilibrium
Mobility Index
JEL:D43
D85
L11
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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