Capacity Expansion in Markets with Intertemporal Consumption Externalities
AbstractThis paper analyzes market capacity expansion in the presence of intertemporal consumption externalities such as consumer learning, networks, or bandwagon effects. The externality leads to an endogenous shift of market demand that responds to past market capacity. Whereas market capacity grows in waves, its magnitude depends on the degree of market concentration. The competitive environment contributes to S-shaped time patterns of market capacity expansion that is slow from the social viewpoint. On the other hand, using an introductory price, a monopolist plans an initially larger, but eventually smaller, amount of market cultivation than a competitive market capacity expansion.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 07-11.
Length: 31 pages
Date of creation: Apr 2007
Date of revision:
Intertemporal consumption externalities; S-shaped diffusion; Market structure; Introductory price.;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-09 (All new papers)
- NEP-MIC-2007-04-09 (Microeconomics)
- NEP-NET-2007-04-09 (Network Economics)
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