How Does Market Network Structure Affect Participants' Benefits?

Abstract EN

A mathematical model is made to answer the question of how market network structure affects market participants’ benefits.

In this paper, one monopoly, one kind of goods, and n consumers are assumed to form the market.

The market network structure is defined as the mutual influences among consumers on purchase behaviors, and the benefits are defined as the sum of each consumer’s utility as well as the profit of the monopoly.

By completely knowing or not knowing the market network structure, the monopoly is designed to make decisions on price in such two cases.

As a result, this paper finds that (1) when the market network structure is symmetric, completely knowing or not knowing the market structure network structure does not change the participants’ benefits; (2) when the market network structure is asymmetric, knowing the network structure can help to improve the monopoly’s profit, and meanwhile the consumers’ benefits are identical on average in the statistical sense; (3) the increasing degree of the network structure matrix’s asymmetry leads to the increasing benefits of the monopoly with fixing its original structure.

Besides, policy implications and further work are also discussed.