Nonlinear Pricing with Local Network Effects

Gramstad, Arne Rogde

doi:10.2139/ssrn.2597638

Cited by 4 publications

(3 citation statements)

References 27 publications

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“…Depending on this choice, their model can generate both quantity discounts and premia. Gramstad (2016) consider screening in a undirected network when network effects only depend on the number of neighbors that adopted the good, not their intensity of consumption. We analyze both dimensions of private informationpayoff type and influence -at the same time and study their interaction in screening.…”

Section: Literaturementioning

confidence: 99%

Screening while controlling an externality

Ostrizek

Sartori

2023

Games and Economic Behavior

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Section: Literaturementioning

confidence: 99%

Screening while controlling an externality

Ostrizek

Sartori

2023

Games and Economic Behavior

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“…Finally, Gramstad (2016) has recently addressed questions similar to the ones explored here by considering a monopolist that allows consumers to choose from a menu of differentiated products in the presence of local externalities. While Gramstad (2016) explores the role of the network structure in optimal pricing when consumers may choose between different versions of a product, as the current article does, there are important differences between both approaches. The main one is that a mechanism such as advertising, which influences consumers' valuations, is absent in Gramstad (2016)'s analysis.…”

Section: Literature Connectionsmentioning

confidence: 99%

“…In addition, the size of the network externality in the model proposed here depends only on the version chosen by the consumer herself and not on the versions chosen by her neighbors. The model presented here considers a single market for a (two-version) service, whereas Gramstad (2016) focuses more on segmented markets along the network.…”

Section: Literature Connectionsmentioning

confidence: 99%

Discrimination through versioning with advertising in social networks

Jiménez-Martínez

2018

Econ Theory

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This article investigates a second-degree discrimination scheme where an online platform sells a two-version service to consumers involved in a random network. In particular, consumers choose between purchasing a premium or a free version of the service. The premium version is sold at a price and enables higher network externalities than the free version. The free version includes advertising about some product-unrelated to the service. Under the assumptions that (a) advertising rotates clockwise the inverse demand of the advertised product and (b) the platform receives a fixed portion of the revenue from the sales of the advertised product, I explore (1) how the random network, and the market conditions for the advertised product, relate to the optimal pricing of the service, and (2) the welfare implications for the platform and the consumers. Hazard rate functions are crucial for optimal pricing, and first-order stochastic dominance of the degree distribution characterizes the welfare implications. The model provides foundations for empirical analysis on degree distributions and hazard rate functions underlying complex social networks. This is a substantial revision of a paper by Oscar González and Antonio Jiménez-Martínez formerly circulated under the title "Second-Degree Discrimination with Advertising in Random Networks". In addition to the previous version, the current paper supersedes portions of Jimenez-Martinez (2017)'s "'Versioning' with Advertising in Social Networks". I acknowledge financial support from CONACYT, Grant 41826.

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