Firms in Input and Output Networks

The issue I want to take up here is how networks influence firm business not only from the costs and R&D side, but also from the demand side because of substitution - complementarity effects. In other words firms face networks at every intermediate level that has to meet the market. I will present a very simple framework, where, by generalizing the well known D'Aspremont-Joaquin (1988), demand and costs will be both modeled using network matrices. The standard approach has always considered these matrices as full, implying firms to be fully connected. The novelty about network topologies is that they express sparse matrices in which some of the effects don't work, because there are no transmission links, whilst other links work exponentially well. In fact, the novelty of a network approach to economic models is not to enhance links, but to study holes