Monday, November 30, 2015
Matthias Firgo (Austrian Institute of Economic Research (WIFO)) ; Dieter Pennerstorfer (Department of Economics, Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO)) ; Christoph R. Weiss (Department of Economics, Vienna University of Economics and Business) offer Network Centrality and Market Prices: An Empirical Note.
ABSTRACT: We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center - defined as the 1-median location - exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms' pricing behavior and further find that the importance of centrality increases with market size.