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Price and quality decisions under network effects

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  • Navarro, Noemí

Abstract

I analyse monopoly pricing and quality decisions under network effects. High quality premium and low quality punishment are found to depend on how the impact of marginal costs on quality relates to the intensity of the network effect and the optimism of the producer about final demand. More precisely, marginal costs have to be low enough (but not too low) with respect to the intensity of the network effects and/or the optimism about final demand so that higher prices reflect higher quality. A similar conclusion can be drawn about incentives for quality provision, whenever quality is considered endogenous together with price.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 5 ()
Pages: 263-270

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Handle: RePEc:eee:mateco:v:48:y:2012:i:5:p:263-270

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Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Network effects; Optimal pricing; Quality provision;

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Cited by:
  1. Tomas Rodriguez Barraquer, 2013. "From sets of equilibria to structures of interaction underlying binary games of strategic complements," Discussion Paper Series dp655, The Center for the Study of Rationality, Hebrew University, Jerusalem.

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