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Competition Or Predation? Consumer Coordination, Strategic Pricing And Price Floors In Network Markets

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Author Info

  • Joseph Farrell
  • Michael L. Katz

Abstract

Although network effects can make predation more likely to succeed, we find that the leading anti-predation rules may lower or raise efficiency and consumer welfare in network markets. We find that: (a) the extensive debates about the 'correct' measure of cost on which to base price floors are unlikely to be productive; (b) the Ordover-Willig rule that is widely thought to be correct in theory but difficult to apply in practice is, in fact, incorrect in theory; and (c) efficient price floors would have to depend on consumer expectations and coordination processes that are unlikely to be observable in practice. Copyright Blackwell Publishing Ltd. 2005.

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Bibliographic Info

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

Volume (Year): 53 (2005)
Issue (Month): 2 (06)
Pages: 203-231

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Handle: RePEc:bla:jindec:v:53:y:2005:i:2:p:203-231

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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Cited by:
  1. Cerquera Dussán, Daniel, 2006. "Dynamic R&D incentives with network externalities," ZEW Discussion Papers 06-94, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Cerquera Dussán, Daniel, 2006. "R&D incentives, compatibility and network externalities," ZEW Discussion Papers 06-93, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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