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On the excess entry theorem in the presence of network effect-sensitive consumers

Author

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  • Tsuyoshi Toshimitsu

    (School of Economics, Kwansei Gakuin University)

Abstract

We reconsider the gexcess entry theorem h in the case of a network product market. Heterogeneous consumers, who are sensitive to network effects, have passive expectations and Cournot oligopolistic competition prevails in the market. We demonstrate that if the network effect elasticity of network size in the equilibrium is sufficiently large, the number of firms under free entry is socially insufficient, compared with the second-best criteria. Otherwise, the socially excessive entry arises. Furthermore, we examine the case of responsive expectations and of network effect-insensitive consumers.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2020. "On the excess entry theorem in the presence of network effect-sensitive consumers," Discussion Paper Series 210, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:210
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    More about this item

    Keywords

    excess entry theorem; network effect-sensitive consumers; a fulfilled expectation; Cournot oligopoly;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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