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General Network Effects and Welfare

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  • Pollock, R.

Abstract

(In)direct network effects arise frequently in economic models but, for reasons of analytical tractability, are often assumed to be linear. Here, we examine the general non-linear case with two platforms. We establish the conditions characterising equilibria and show that welfare changes can be related in a simple, intuitive way to the degree of diminishing returns of the network effects function.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0915.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0915.

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Date of creation: 07 Apr 2009
Date of revision:
Handle: RePEc:cam:camdae:0915

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: Network Effects; Indirect Network Effects; Platforms; Welfare;

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References

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  1. Pollock, Rufus, 2005. "The Control of Porting in Two-Sided Markets," MPRA Paper 5023, University Library of Munich, Germany, revised Jun 2007.
  2. Church Jeffrey & Gandal Neil & Krause David, 2008. "Indirect Network Effects and Adoption Externalities," Review of Network Economics, De Gruyter, De Gruyter, vol. 7(3), pages 1-22, September.
  3. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  4. Church, Jeffrey & Gandal, Neil, 1992. "Network Effects, Software Provision, and Standardization," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 40(1), pages 85-103, March.
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Cited by:
  1. Tim Paul Thomes, 2010. "Vertically Related Markets of Collective Licensing of Differentiated Copyrights with Indirect Network Effects," Jena Economic Research Papers 2010-056, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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