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Effects of Industry Concentration on Quality Choices for Network Connectivity

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  • Mark A. Jamison

    ()
    (University of Florida)

Abstract

I examine the effects of market concentration on connectivity in network industries. Using Cournot interactions for a duopoly, each network chooses quantity, quality for communications within the provider’s own network (internal quality), and quality for communications between the provider’s network and other networks (external quality). I find that large networks choose higher internal quality than do small networks and large networks choose higher internal quality than external quality. I also find that providers prefer flexible technologies that allow them to simultaneously choose outputs and qualities. Small networks prefer higher external quality than internal quality except when they make credible quality commitments before choosing output and have higher marginal operating costs than large networks. Networks choose identical external quality unless they have exogenously determined customer bases.

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File URL: http://www.netinst.org/Jamison.pdf
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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 04-08.

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Length: 28 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:net:wpaper:0408

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Web page: http://www.NETinst.org/

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  1. David Mandy & David E. M. Sappington, 2004. "Incentives for Sabotage in Vertically Related Industries," Working Papers 0404, Department of Economics, University of Missouri, revised 16 Dec 2004.
  2. Crémer, Jacques & Rey, Patrick & Tirole, Jean, 1999. "Connectivity in the Commercial Internet," IDEI Working Papers 87, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2000.
  3. Giuseppe Lopomo & Efe A. Ok, 1998. "Bargaining, Interdependence, and the Rationality of Fair Division," Working Papers 98-13, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
  5. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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