Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, December 3, 2012

Welfare Analysis in Games with substitutabilities

Posted by D. Daniel Sokol

Yann Rebille (LEMNA) and Lionel Richefort (LEMNA) address Welfare Analysis in Games with substitutabilities.

ABSTRACT: This paper investigates the social optimum in network games of strategic substitutes and identifies how network structure shapes optimal policies. First, we show that the socially optimal profile is ob-tained through a combination of two opposite network effects, generated by the incoming and the outgoing weighted Bonacich centrality measures. Next, three different policies that restore the social optimum are derived, and the implications of the predecessor(s)-successor(s) relationship between the agents on each policy instrument are explored. Then, the link between optimal taxes and the density of the network is established.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/12/welfare-analysis-in-games-with-substitutabilities-.html

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