# Price Setting on a Network

## TL;DR

This paper analyzes how interconnected supply chain networks determine prices, revealing a unique equilibrium and highlighting the impact of network structure and multiple-marginalization on profits and social welfare.

## Contribution

It introduces a model of price-setting on networks, proves the existence of a unique equilibrium, and defines a new measure of network centrality called influentiality.

## Key findings

- Unique equilibrium in network price-setting game
- Multiple-marginalization reduces profits and welfare
- Profits are proportional to influentiality

## Abstract

Most products are produced and sold by supply chain networks, where an interconnected network of producers and intermediaries set prices to maximize their profits. I show that there exists a unique equilibrium in a price-setting game on a network. The key distortion reducing both total profits and social welfare is multiple-marginalization, which is magnified by strategic interactions. Individual profits are proportional to influentiality, which is a new measure of network centrality defined by the equilibrium characterization. The results emphasize the importance of the network structure when considering policy questions such as mergers or trade tariffs.