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Vanity and Congestion: A Study of Reciprocal Externalities

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Author Info

  • Häckner, Jonas

    (Research Institute of Industrial Economics (IFN))

  • Nyberg, Sten

    (Research Institute of Industrial Economics (IFN))

Abstract

This paper models a private goods oligopoly market characterized by negative and reciprocal externalities. Although firms compete in prices and products are undifferentiated in equilibrium, the price-cost margin turns out to be positive. From a social perspective, the equilibrium price is higher than what is motivated by the negative externality. Hence, welfare can be improved by means of a price ceiling. Finally, industries with high fixed costs would be expected to exhibit a high degree of concentration on the supply side and considerable price-cost margins. Copyright 1996 by The London School of Economics and Political Science.

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File URL: http://www.ifn.se/wfiles/wp/wp354.pdf
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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 354.

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Length: 14 pages
Date of creation: 22 Dec 1992
Date of revision:
Handle: RePEc:hhs:iuiwop:0354

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Keywords: Consumption externalities; Bertrand oligopoly model; Welfare;

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References

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  1. Häckner, Jonas & Nyberg, Sten, 1992. "Deregulating Taxi Services - A Word of Caution," Working Paper Series 353, Research Institute of Industrial Economics.
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Citations

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Cited by:
  1. Tore Nilssen, 2011. "Risk externalities in a payments oligopoly," Portuguese Economic Journal, Springer, vol. 10(3), pages 211-234, December.
  2. Shy, Oz, 2007. "Dynamic models of religious conformity and conversion: Theory and calibrations," European Economic Review, Elsevier, vol. 51(5), pages 1127-1153, July.
  3. Häckner, Jonas & Muren, Astri, 2012. "Counterfeiting and Consumption Externalities - A Closer Look," Research Papers in Economics 2012:2, Stockholm University, Department of Economics.
  4. Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: can we expect toll differentiation?," Economic Growth centre Working Paper Series 0504, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  5. Koford, Kenneth & Tschoegl, Adrian E., 1998. "The market value of rarity," Journal of Economic Behavior & Organization, Elsevier, vol. 34(3), pages 445-457, March.
  6. Häckner, Jonas & Nyberg, Sten, 1992. "Deregulating Taxi Services - A Word of Caution," Working Paper Series 353, Research Institute of Industrial Economics.
  7. van Ackere, Ann & Haxholdt, Christian, 2002. "Clubs as status symbol: would you belong to a club that accepts you as a member?," Socio-Economic Planning Sciences, Elsevier, vol. 36(2), pages 93-107, June.

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