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- Title
Market interaction structure and equilibrium price heterogeneity in monopolistic competition.
- Authors
Sebestyén, Tamás; Szabó, Balázs
- Abstract
This paper investigates the extent to which the structure of the interaction network between suppliers and buyers affects equilibrium price heterogeneity. An incomplete interaction structure leads to uneven information flows and different information bases for consumers which is then taken into account by price setting producers. This results in heterogenous prices even if producers are identical in all other respects. The complete interaction network serves as a special case resembling standard monopolistic competition models. We show that a slight deviation from the complete network results in heterogeneous prices, although this heterogeneity becomes economically significant only under sparse or small networks. Sparsity as the main determinant of price heterogeneity dominates network asymmetry: relatively dense networks show minimal price dispersion even if its degree distribution follows a power law.
- Subjects
MONOPOLISTIC competition; PRICES; MARKET design &; structure (Economics); HETEROGENEITY; WHOLESALE prices
- Publication
NETNOMICS: Economic Research & Electronic Networking, 2022, Vol 22, Issue 2/3, p259
- ISSN
1385-9587
- Publication type
Article
- DOI
10.1007/s11066-022-09155-5