Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83712
Authors: 
Lever Guzmán, Carlos
Year of Publication: 
2011
Series/Report no.: 
Working Papers, Banco de México 2011-04
Abstract: 
We present a model of imperfect price competition where not all firms can sell to all consumers. A network structure models the local interaction of firms and consumers. We find that aggregate surplus is maximized with a fully connected network, which corresponds to perfect competition, and decreases monotonically as the network becomes less connected until firms become local monopolists. When we study which networks are likely to form in equilibrium, we find that stable networks are not fully connected but are connected enough to rule out local monopolists. Our results extend to oligopolistic competition when consumerscan either buy from a single firm or from all firms.
Subjects: 
network markets
price competition
oligopoly competition
Bertrand competition
JEL: 
D43
D85
L11
L13
Document Type: 
Working Paper
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