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Price Strategies and Compatibility in Digital Networks

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Author Info

  • �ystein Foros

Abstract

We analyze competition between two horizontally differentiated network providers. New technologies help the providers to collect consumer-specific information, and such technologies increase the providers' ability to use price discrimination. One example is the mobile providers' choice of investing into third generation mobile systems (3G). Compared to the current 2G systems (GSM), 3G gives the providers more accurate customer specific information (e.g. with respect to customers' location at any time). Since new technologies give the opportunity to implement price discrimination, an interesting question is how the price strategies (price discrimination or not) affect the incentives to unilaterally establish a walled garden where the rival's customers have imperfect access. The main message of the paper is that walled garden strategies are more likely when firms use price discrimination than when they all use linear pricing.

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File URL: http://www.tandfonline.com/10.1080/13571510601097157
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 14 (2007)
Issue (Month): 1 ()
Pages: 85-97

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Handle: RePEc:taf:ijecbs:v:14:y:2007:i:1:p:85-97

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Web page: http://www.tandfonline.com/CIJB20

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Web: http://www.tandfonline.com/pricing/journal/CIJB20

Related research

Keywords: Compatibility; Network Effects; Price Discrimination; Internet; Competition;

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Cited by:
  1. Fabio Maria Manenti & Ernesto Somma, 2002. "One-Way Compatibility, Two-Way Compatibility and Entry in Network Industries," series 0004, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Jan 2002.

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