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Income Distribution in Network Markets

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  • Corrado Benassi

    ()
    (Dipartimento di Scienze Economiche, Alma Mater Studiorum - Università di Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)

  • Marcella Scrimitore

    ()
    (Dipartimento di Scienze dell’Economia, Università del Salento, Italy; The Rimini Centre for Economic Analysis, Italy)

Abstract

We enquiry about the effects of first and second order stochastic dominance shifts of the distribution of the consumers’ willingness to pay, within the standard model of a market with network externalities and hump-shaped demand curve. This issue is analyzed in the polar cases of perfect competition and monopoly. We find that, while under perfect competition both types of distributional changes result in higher output, provided marginal costs are low enough, in the monopoly case the final outcome depends on the way income distribution and the network externality interact in determining market demand elasticity.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 13_13.

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Date of creation: Jan 2013
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Handle: RePEc:rim:rimwps:13_13

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Keywords: Network externalities; income distribution; stochastic dominance;

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