ERC Consolidator Grant

Oligopoly Markets and Networks

Via our connections we learn about new ideas, the quality of products, new investment possibilities and job opportunities. We influence, and are influenced, by our circle of friends. Firms are interconnected in complex processes of production and distribution. A firm’s decisions in a supply chain depend on other firms’ choices in the same supply chain, as well as on firms’ behaviour in competing chains. Research on networks in the last 20 years has provided a series of tolls to study a system of interconnected economic agents. This project will advance the state-of-the-art by further developing new applications of networks to better understand modern oligopoly markets.

The project is organised into two sub-projects.

In sub-project 1, networks will be used to model diffusion and adoption of network goods. Different consumers’ network locations will summarise different consumers’ level of influence. The objectives are to understand how firms incorporate information about consumers’ influence in their marketing strategies—pricing strategy and product design. It will provide a rigorous framework to evaluate how the increasing ability of firms to gather information on consumers’ influence affects outcomes of markets with network effects.

In sub-project 2, networks will be used to model how inputs—e.g., intermediary goods and patents—are combined to deliver final goods. Possible applications are supply chains, communication networks, and networks of patents. The objectives are to study firms’ strategic behaviour, like pricing and R&D investments, in a complex process of production and distribution, and to understand the basic network metrics that are useful to describe market power. This is particularly important in order to provide a guide to competition authorities and alike, when they evaluate mergers in complex interconnected markets.

Published outputs

2020. The market for influence, with I. Fainmesser. Conditionally accepted American Economic Journal-Microeconomics

2020. Rotation as Contagion Mitigation. with J. Ely and J. Steiner. Forthcoming Management Science. (ideas from this paper have been incorporated into the DELVE report of the Royal Society, which I have contributed to write together with Paolo Surico and other UK based economists).

2020. Targeting interventions in networks (first version 2017),  B. Golub and S. Goyal. Forthcoming Econometrica.

2019. The role of networks in antitrust investigations, with Matthew Elliot. Prepared for Oxford Review of Economic Policy.

2019 Pricing network effects: competition, with I. Fainmesser. The American Economic Journal: Microeconomics. Forthcoming.

Work in paper and work in progress

2020. Digital Privacy.  With I. Fainmesser and R. Momot. (First Version September 2019)

2016. Market segmentation through information, with Matthew Elliot.

2017 Financial linkages and portfolio choice, with C. Ghiglino (Second R&R Journal of Economic Theory) (The project started with Sanjeev Goyal and we are grateful to him for the first draft).

2020 Resale mechanisms on networks, with D. Condorelli and L. Renou.

2020 Pigouvian intervention in supply chains, with B. Golub, S. Goyal, E. Talamas, O. Tamuz.