A Note on Quality Choice, Monopoly, and Network Externality
AbstractIntroducing network externalities into a model of vertically differentiated products, Lambertini and Orsini (2001, 2003) analyze the implications of a monopolist’s quality choice for social optimum. Moreover, they examine how the network externality affects quality, quantity, price, and social surplus. In this note, by looking at the nature of cost functions and the degree of network externalities, we reconsider their results, at least some of which depend upon the specificity of the cost functions. Copyright Springer Science+Business Media, LLC 2007
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Bibliographic InfoArticle provided by Springer in its journal Journal of Industry, Competition and Trade.
Volume (Year): 7 (2007)
Issue (Month): 2 (June)
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Web page: http://springerlink.metapress.com/link.asp?id=105724
network externality; quality choice; vertically differentiated product; monopoly; D42; L12; L15;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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- David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
- L. Lambertini & R. Orsini, 1998. "Monopoly, Quality, and Network Externalities," Working Papers 334, Dipartimento Scienze Economiche, Universita' di Bologna.
- Heli Koski & Tobias Kretschmer, 2004. "Survey on Competing in Network Industries: Firm Strategies, Market Outcomes, and Policy Implications," Journal of Industry, Competition and Trade, Springer, vol. 4(1), pages 5-31, 03.
- Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
- Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Luca Lambertini & Raimondello Orsini, 2001. "Network Externalities and the Overprovision of Quality by a Monopolist," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 969-982, April.
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