Hiroshi Kitamura () (Graduate School of Economics, Osaka University)
Abstract
This 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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Publisher Info
Paper 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.