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Network Markets and Consumer Coordination

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  • Attila Ambrus
  • Rossella Argenziano

Abstract

This paper assumes that groups of consumers in network markets can coordinate their choices when it is in their best interest to do so, and when coordination does not require communication. It is shown that multiple asymmetric networks can coexist in equilibrium if consumers have heterogeneous reservation values. A monopolist provider might choose to operate multiple networks to price differentiate consumers on both sides of the market. Competing network providers might operate networks such that one of them targets high reservation value consumers on one side of the market, while the other targets high reservation value consumers on the other side. Firms can obtain positive profits in price competition. In these asymmetric equilibria product differentiation is endogenized by the network choices of consumers. Heterogeneity of consumers is necessary for the existence of this type of equilibrium.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-10/cesifo1_wp1317.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1317.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1317

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Citations

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Cited by:
  1. Jullien, Bruno, 2010. "Two-Sided B2B Platforms," IDEI Working Papers 652, Institut d'Économie Industrielle (IDEI), Toulouse, revised Mar 2011.
  2. Iván Major, 2006. "Why do (or do not) banks share customer information? A comparison of mature private credit markets and markets in transition," IEHAS Discussion Papers 0603, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 24 Apr 2006.
  3. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
  4. Csoka, Peter & Herings, P. Jean-Jacques & Koczy, Laszlo A., 2007. "Coherent measures of risk from a general equilibrium perspective," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2517-2534, August.
  5. Bruno Jullien, 2004. "Two-Sided Markets and Electronic Intermediaries," CESifo Working Paper Series 1345, CESifo Group Munich.
  6. Gabor Virag, 2006. "Outside offers and bidding costs," IEHAS Discussion Papers 0610, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 30 Aug 2006.
  7. András Simonovits, 2006. "Social Security Reform in the US: Lessons from Hungary," IEHAS Discussion Papers 0602, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 24 Apr 2006.
  8. Kurucu, Gokce, 2007. "Negative Network Externalities in Two-Sided Markets: A Competition Approach," MPRA Paper 9746, University Library of Munich, Germany.
  9. Jullien, Bruno, 2004. "Two-Sided Markets and Electronic Intermediation," IDEI Working Papers 295, Institut d'Économie Industrielle (IDEI), Toulouse.

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