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Discussion Paper

Competing for Customers in a Social Network

There are many situations in which a customer’s proclivity to buy the product of any firm depends not only on the classical attributes oft he product such as its price and quality, but also on who else is buying the same product. We model these situations as games in which firms compete for customers located in a “social network.” Nash Equilibrium (NE) in pure strategies exist in general. In the quasi-linear version of the model, NE turn out to be unique and can be precisely characterized.