We study pricing strategies of competing firms that sell heterogeneous products to consumers in a social network. Goods are substitutes and there are network externalities between neighboring consumers. We show that there exists a unique subgame-perfect equilibrium where, in the first stage,...

We propose a dynamic efficiency wage model with learning by doing. By taking into account the change inthe stock of workers’ knowledge, firms set efficiency wages such that the effort–wage elasticity is not in general equal to one.