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Entry into a Network Industry: Consumers' Expectations and Firms' Pricing Policies

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Author Info
Angelo Baglioni (Catholic University Milan)

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Abstract

Entry into a network industry is modeled focusing on consumers' expectations formation through higher order beliefs. Equilibrium expectations are endogenous and depend on prices, acting as a coordination device among consumers. The model is able to account for aggressive pricing policies by the incumbent and by the entrant. Both exclusion and entry are possible outcomes (depending on parameter values). The threat of entry is beneficial to consumers, even when unsuccessful.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=2012&context=bejeap
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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 8 (2008)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejeap:v:8:y:2008:i:1:n:23

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Web page: http://www.bepress.com/bejeap

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Related research
Keywords: networks; entry; expectations;

Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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This page was last updated on 2009-12-30.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.