dc.contributor.author | Candogan, Utku Ozan | |
dc.contributor.author | Bimpikis, Konstantinos | |
dc.contributor.author | Ozdaglar, Asuman E | |
dc.date.accessioned | 2011-05-31T18:19:18Z | |
dc.date.available | 2011-05-31T18:19:18Z | |
dc.date.issued | 2010-12 | |
dc.identifier.uri | http://hdl.handle.net/1721.1/63148 | |
dc.description | URL to paper listed on conference site | en_US |
dc.description.abstract | We study the optimal pricing strategies of a monopolist selling a divisible good (service) to
consumers that are embedded in a social network. A key feature of our model is that consumers
experience a (positive) local network e ffect. In particular, each consumer's usage level depends
directly on the usage of her neighbors in the social network structure. Thus, the monopolist's
optimal pricing strategy may involve o ffering discounts to certain agents3, who have a central
position in the underlying network. Our results can be summarized as follows. First, we consider a
setting where the monopolist can o er individualized prices and derive an explicit characterization
of the optimal price for each consumer as a function of her network position. In particular, we
show that it is optimal for the monopolist to charge each agent a price that is proportional to her
Bonacich centrality in the social network. In the second part of the paper, we discuss the optimal
strategy of a monopolist that can only choose a single uniform price for the good and derive an
algorithm polynomial in the number of agents to compute such a price. Thirdly, we assume that
the monopolist can o er the good in two prices, full and discounted, and study the problem of
determining which set of consumers should be given the discount. We show that the problem is
NP-hard, however we provide an explicit characterization of the set of agents that should be o ffered
the discounted price. Finally, we describe an approximation algorithm for finding the optimal set of
agents. We show that if the pro t is nonnegative under any feasible price allocation, the algorithm
guarantees at least 88 % of the optimal pro fit. | en_US |
dc.language.iso | en_US | |
dc.relation.isversionof | http://www.stanford.edu/group/wine/accepted.html | en_US |
dc.rights | Creative Commons Attribution-Noncommercial-Share Alike 3.0 | en_US |
dc.rights.uri | http://creativecommons.org/licenses/by-nc-sa/3.0/ | en_US |
dc.source | MIT web domain | en_US |
dc.title | Optimal pricing in the presence of local network effects | en_US |
dc.type | Article | en_US |
dc.identifier.citation | Candogan, Ozan, Kostas Bimpikis and Asuman Ozdaglar. "Optimal pricing in the presence of local network effects." Proceedings of the 6th Workshop on Internet & Network Economics, WINE 2010, December 13-16, 2010, Stanford University, Stanford, California, USA. | en_US |
dc.contributor.department | Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science | en_US |
dc.contributor.department | Massachusetts Institute of Technology. Laboratory for Information and Decision Systems | en_US |
dc.contributor.department | Massachusetts Institute of Technology. Operations Research Center | en_US |
dc.contributor.approver | Ozdaglar, Asuman E. | |
dc.contributor.mitauthor | Ozdaglar, Asuman E. | |
dc.contributor.mitauthor | Candogan, Utku Ozan | |
dc.contributor.mitauthor | Bimpikis, Konstantinos | |
dc.relation.journal | Proceedings of the 6th Workshop on Internet & Network Economics, WINE 2010 | en_US |
dc.eprint.version | Author's final manuscript | en_US |
dc.type.uri | http://purl.org/eprint/type/ConferencePaper | en_US |
dspace.orderedauthors | Candogan, Ozan; Bimpikis, Kostas; Ozdaglar, Asuman | |
dc.identifier.orcid | https://orcid.org/0000-0002-1827-1285 | |
mit.license | OPEN_ACCESS_POLICY | en_US |
mit.metadata.status | Complete | |