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Critical Mass and Tariff Structure in Electronic Communications Markets

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Author Info
Shmuel S. Oren
Stephen A. Smith
Abstract

Most communication services have a demand "externality" in that the benefit to a subscriber depends upon how many of his communication partners also subscribe. This article develops an economic model that determines both the required critical mass size for startup and the ultimate expansion level of such a system. The effects of different pricing structures for the service are evaluated under the assumption that users maximize benefits minus cost and a monopoly supplier maximizes profit.

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Publisher Info
Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 12 (1981)
Issue (Month): 2 (Autumn)
Pages: 467-487
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Handle: RePEc:rje:bellje:v:12:y:1981:i:autumn:p:467-487

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  1. Jong-Hee Hahn, 2000. "Nonlinear Pricing of Telecommunications with Call and Network Externalities," Keele Department of Economics Discussion Papers (1995-2001) 2000/15, Department of Economics, Keele University, revised Nov 2001. [Downloadable!]
    Other versions:
  2. Stefan Mai, 2002. "International co-ordination of e-commerce," IWP Discussion Paper Series 03/2002, Institute for Economic Policy, Cologne, Germany. [Downloadable!]
  3. Chichilnisky, Graciela, 1995. "The evolution of a global network: a game of coalition formation," MPRA Paper 8487, University Library of Munich, Germany. [Downloadable!]
  4. Pio Baake & Kay Mitusch, 2009. "Mobile phone termination charges with asymmetric regulation," Journal of Economics, Springer, vol. 96(3), pages 241-261, April. [Downloadable!] (restricted)
    Other versions:
  5. Nicholas Economides, 1997. "Network Externalities, Complementarities, and Invitations to Enter," Industrial Organization 9701004, EconWPA. [Downloadable!]
    Other versions:
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