Networks, Percolation, and Demand

Paolo Zeppini, Koen Frenken

Research output: Working paper

Abstract

We propose a diffusion model for a new product percolating in a social network. Given that consumers differ in their reservation prices, a critical price exists that defines a phase transition from a no-diffusion to a diffusion regime. As consumer surplus is maximised just below a product's critical price, one can systematically compare the economic efficiency of network structures by investigating their critical price. Networks with low clustering turn out to be most efficient, because clustering leads to redundant information flows hampering effective product diffusion. We further show how the more equal a society, the more efficient the diffusion process.
LanguageEnglish
Place of PublicationBath, U. K.
PublisherDepartment of Economics, University of Bath
StatusPublished - 2015

Publication series

NameBath Economics Research Working Papers
Volume38/15

Fingerprint

Clustering
Diffusion model
Diffusion process
Economic efficiency
New products
Network structure
Social networks
Information flow
Reservation price
Product diffusion
Phase transition
Consumer surplus

Cite this

Zeppini, P., & Frenken, K. (2015). Networks, Percolation, and Demand. (Bath Economics Research Working Papers; Vol. 38/15). Bath, U. K.: Department of Economics, University of Bath.

Networks, Percolation, and Demand. / Zeppini, Paolo; Frenken, Koen.

Bath, U. K. : Department of Economics, University of Bath, 2015. (Bath Economics Research Working Papers; Vol. 38/15).

Research output: Working paper

Zeppini, P & Frenken, K 2015 'Networks, Percolation, and Demand' Bath Economics Research Working Papers, vol. 38/15, Department of Economics, University of Bath, Bath, U. K.
Zeppini P, Frenken K. Networks, Percolation, and Demand. Bath, U. K.: Department of Economics, University of Bath. 2015, (Bath Economics Research Working Papers).
Zeppini, Paolo ; Frenken, Koen. / Networks, Percolation, and Demand. Bath, U. K. : Department of Economics, University of Bath, 2015. (Bath Economics Research Working Papers).
@techreport{24e9fad1b94646d9be110825da5514fa,
title = "Networks, Percolation, and Demand",
abstract = "We propose a diffusion model for a new product percolating in a social network. Given that consumers differ in their reservation prices, a critical price exists that defines a phase transition from a no-diffusion to a diffusion regime. As consumer surplus is maximised just below a product's critical price, one can systematically compare the economic efficiency of network structures by investigating their critical price. Networks with low clustering turn out to be most efficient, because clustering leads to redundant information flows hampering effective product diffusion. We further show how the more equal a society, the more efficient the diffusion process.",
author = "Paolo Zeppini and Koen Frenken",
year = "2015",
language = "English",
series = "Bath Economics Research Working Papers",
publisher = "Department of Economics, University of Bath",
type = "WorkingPaper",
institution = "Department of Economics, University of Bath",

}

TY - UNPB

T1 - Networks, Percolation, and Demand

AU - Zeppini,Paolo

AU - Frenken,Koen

PY - 2015

Y1 - 2015

N2 - We propose a diffusion model for a new product percolating in a social network. Given that consumers differ in their reservation prices, a critical price exists that defines a phase transition from a no-diffusion to a diffusion regime. As consumer surplus is maximised just below a product's critical price, one can systematically compare the economic efficiency of network structures by investigating their critical price. Networks with low clustering turn out to be most efficient, because clustering leads to redundant information flows hampering effective product diffusion. We further show how the more equal a society, the more efficient the diffusion process.

AB - We propose a diffusion model for a new product percolating in a social network. Given that consumers differ in their reservation prices, a critical price exists that defines a phase transition from a no-diffusion to a diffusion regime. As consumer surplus is maximised just below a product's critical price, one can systematically compare the economic efficiency of network structures by investigating their critical price. Networks with low clustering turn out to be most efficient, because clustering leads to redundant information flows hampering effective product diffusion. We further show how the more equal a society, the more efficient the diffusion process.

M3 - Working paper

T3 - Bath Economics Research Working Papers

BT - Networks, Percolation, and Demand

PB - Department of Economics, University of Bath

CY - Bath, U. K.

ER -