Markets of information goods facing a strong P2P network
AbstractThis paper studies a traditional monopolistic market of information goods in the presenceof an inherently strong peer-to-peer file-sharing network. Specifically, such a strongnetwork is made possible by a few fanatic users who selflessly contribute to the sharingof files. We find that the most prevalent equilibrium outcome is the one where the firmaccommodates the network and competes in price. We establish that coordination failurein the forming of networks is not an issue once we consider a high level of taste heterogeneity and include such fanatic users in the model. We also find possible network-deterring market structures, although these can only happen under limited circumstances. Furthermore, it is not impossible to see the firm and the network co-existing as local monopolies not serving the entire market and therefore not competing. For this market structure to occur, the taste heterogeneity has to be very large. Finally, we find that in all the equilibrium structures, total welfare always decreases in taste heterogeneity and the generic cost factor of downloading.
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Bibliographic InfoPaper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 037.
Date of creation: 2010
Date of revision:
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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-28 (All new papers)
- NEP-COM-2010-08-28 (Industrial Competition)
- NEP-NET-2010-08-28 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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