Summary of Project Results
Supply, service and trading chains are a defining feature of the modern economy.
They are prominent in agriculture, in transport and communication networks, in international trade, in markets for bribes and in finance. Goods and services pass through individuals or firms located along these chains. The routing of economic activity, the earnings of individuals and the efficiency of the system depend on the prices set by these different intermediaries. The aim of this paper is to understand how the network structure of chains shapes market power and thereby determines prices and efficiency.
Research Output
Trading in Networks: Theory and Experiments, Syngjoo Choi, Andrea Galeotti and Sanjeev Goyal (2016)
Abstract: We propose a model of posted prices in networks. The model maps traditional concepts of market power, competition and double marginalization into networks, allowing for the study of pricing in complex structures of intermediation, such as supply chains, transportation and communication networks and financial brokerage. We provide a complete characterization of equilibrium prices. Our experiments complement our theoretical work and point to node criticality as an organizing principle for understanding pricing, efficiency and the division of surplus in networked markets.
