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Abstract

The model identifies the quality of a network product with the number of consumers using it. Hence, the producer cannot unilaterally control the quality of his product. Using the preference specification of vertical quality differentiation, it is shown that the largest network produced will be the most expensive one and used by the richest consumers. Noncooperative industry structures result in a larger market coverage than cooperative. If producers can enter the market freely, market coverage with noncompatible networks will be larger. However, if there is no free entry, market coverage is larger with a single industry-wide standard. Copyright 1995 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 43 (1995)
Issue (Month): 2 (June)
Pages: 197-208

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Handle: RePEc:bla:jindec:v:43:y:1995:i:2:p:197-208

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Cited by:

1. Lee, In Ho & Mason, Robin, 2001. "Market structure in congestible markets," European Economic Review, Elsevier, vol. 45(4-6), pages 809-818, May.
2. Attila Ambrus & Rosella Argenziano, 2004. "Network Markets and Consumer Coordination," IEHAS Discussion Papers 0423, Institute of Economics, Hungarian Academy of Sciences.
   
   • Attila Ambrus & Rossella Argenziano, 2004. "Network Markets and Consumers Coordination," Cowles Foundation Discussion Papers 1481, Cowles Foundation for Research in Economics, Yale University.
   • Attila Ambrus & Rossella Argenziano, 2004. "Network Markets and Consumer Coordination," CESifo Working Paper Series 1317, CESifo Group Munich.
3. Baake, Pio & Boom, Anette, 2001. "Vertical product differentiation, network externalities, and compatibility decisions," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 267-284, January.
   
   • Anette Boom & Pio Baake, . "Vertical Product Differentiation, Network Externalities, and Compatibility Decisions," Papers 010, Departmental Working Papers.
4. Amihai Glazer & Vesa Kanniainen & Mikko Mustonen, 2002. "Innovation of Network Goods: A Non-Innovating Firm Will Gain," CESifo Working Paper Series 692, CESifo Group Munich.
5. Jean J., GABSWEWICZ & Filomena, GARCIA, 2005. "Quality improvement and network externalities," Discussion Papers (ECON - Département des Sciences Economiques) 2005064, Université catholique de Louvain, Département des Sciences Economiques.
   
   • GABSZEWICZ, Jean J. & GARCIA, Filomena, 2005. "Quality improvement and network externalities," CORE Discussion Papers 2005096, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
6. C. Robert Clark & Ignatius J. Horstmann, 2005. "Advertising and Coordination in Markets with Consumption Scale Effects," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 377-401, 06.
   
   • C. Robert Clark & Ignatius J. Horstmann, 2004. "Advertising and Coordination in Markets with Consumption Scale Effects," CIRANO Working Papers 2004s-35, CIRANO.
7. Sääskilahti, Pekka, 2006. "Buying Decision Coordination and Monopoly Pricing of Network Goods," MPRA Paper 5106, University Library of Munich, Germany.
8. Conrad, Klaus, 2004. "Network effects, Compatibility and the Environment : The Case of Hydrogen Powered Cars," Discussion Papers 613, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
9. de Palma, Andre & Leruth, Luc & Regibeau, Pierre, 1999. "Partial compatibility with network externalities and double purchase," Information Economics and Policy, Elsevier, vol. 11(2), pages 209-227, July.
10. Tian Xia & Richard Sexton, 2010. "Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination," Review of Industrial Organization, Springer, vol. 36(4), pages 333-349, June.
11. L. Colombo, 2003. "Quality of service in the Congestible Internet: a Differential Game with Capacity Investments," Working Papers 485, Dipartimento Scienze Economiche, Universita' di Bologna.
12. Maarten C.W. Janssen & Ewa Mendys, 2000. "Adoption of Superior Technology in Markets with Heterogeneous Network Externalities and Price Competition," Tinbergen Institute Discussion Papers 00-087/1, Tinbergen Institute.
13. Griva, Krina & Vettas, Nikolaos, 2011. "Price competition in a differentiated products duopoly under network effects," Information Economics and Policy, Elsevier, vol. 23(1), pages 85-97, March.
14. Kretschmer, Tobias, 2004. "Upgrading and niche usage of PC operating systems," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1155-1182, November.
15. Pekka Saaskilahti, 2006. "Strategic R&D And Network Compatibility," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(8), pages 711-733.

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