General Network Effects and Welfare
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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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0915.
Date of creation: 07 Apr 2009
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Web page: http://www.econ.cam.ac.uk/index.htm
Network Effects; Indirect Network Effects; Platforms; Welfare;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-13 (All new papers)
- NEP-COM-2009-04-13 (Industrial Competition)
- NEP-IND-2009-04-13 (Industrial Organization)
- NEP-MIC-2009-04-13 (Microeconomics)
- NEP-NET-2009-04-13 (Network Economics)
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