2019/04/14 by Hinnosaar, Toomas
#Computer Science and Game Theory (cs.GT) #FOS: Computer and information sciences #FOS: Economics and business #General Economics (econ.GN) #Theoretical Economics (econ.TH)
paper · doi:10.48550/arxiv.1904.06757
Most products are produced and sold by supply chain networks, where an interconnected network of producers and intermediaries set prices to maximize their profits. I show that there exists a unique equilibrium in a price-setting game on a network. The key distortion reducing both total profits and social welfare is multiple-marginalization, which is magnified by strategic interactions. Individual profits are proportional to influentiality, which is a new measure of network centrality defined by the equilibrium characterization. The results emphasize the importance of the network structure when considering policy questions such as mergers or trade tariffs.