Faithin Omaha eBook Collection

Download or read book Essays in Industrial Organization and Social Networks written by Felipe Andres Aviles lucero and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Linear social interactions models where agents' payoffs depend on the average action of the observed peers have opened new areas of research in economics ranging from education to industrial organization. In the first chapter on this thesis, we propose a novelinterpretation of the Nash equilibrium based on a Markov process that evolves according to the neighboring relations in a social network. By means of this interpretation, we give a new pairwise connectivity measure and a overall centrality measure which disentangles the effects of network's topology and agents' heterogeneity that were missing in the dominant centrality measure used in this literature (Bonacich centrality). Also, this Markov approach allows to decompose equilibrium action into a structural effect given by the Markov process' stationary probability distribution common to all agents and an agent specific effect related to her location in the network. Finally, we show that this approach can be used in non-linear models, with examples in education and macroeconomics. In the second chapter, we use the approach proposed in Chapter 1 to solve a general version of the localized competition model where city's shape is interpreted as a network. Localized competition models have been at the core of the Industrial Organization literature. Hotelling (1929) and Salop (1979) are the building blocks of localized competition and their results on equilibrium prices are widely known. One of the main characteristic of these two models is that firms are symmetric in two dimensions: i) firms' location inthe city are indistinguishable and ii) firms have the same marginal cost. In this chapter, we drop both assumptions and work in a generalized setting that enriches the intuition of equilibrium pricing results. We are able to embed different horizontal differentiationmodels in this generalized setting by translating cities' topologies into the graph theory literature. This novel approach allows us to give new insights on equilibrium markup results and also to perform comparative statics on city's topology. In all of our results, we show that the main driving factor on pricing decisions in localized competition models is the Random Walk that city's topology defines when interpreted as a graph. In the last chapter, I depart from the previous chapters and develop a model on Most favored-nation (MFN) and its relation to third degree price discrimination. MFN clauses in wholesale contracts have been the subject of recent controversy and renewed antitrustscrutiny. We demonstrate that an environment where MFN clauses may be adopted shares an equivalence property with an environment where a monopolist sells a good exhibiting negative consumption externalities directly to consumers. The welfare effectsclosely follow those developed in the classic third degree price discrimination literature by Schmalensee (1981) and Varian (1985). As such, the welfare effects of wholesale MFNs are ambiguous for the same reasons the effects of uniform pricing on welfare are ambiguous in the textbook price discrimination problem.