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Competition, Regulation And Welfare In The Presence Of Network Externalities

Author

Listed:
  • ANTOINE SOUBEYRAN
  • KOTARO SUZUMURA
  • SHLOMO WEBER

Abstract

In this paper we consider a simple model of an industry with network externalities, where a benefit to each consumer from network services depends on the size of the network. We first consider a single network and cover the cases with and without fixed cost of entry. We then turn to the two‐network industry, where the incumbent network and a new entrant network compete for the market and may differ both in their marginal costs and demand structures. In addition, we identify several situations where public policy may play a crucial role in sustaining socially advantageous network service provision.

Suggested Citation

  • Antoine Soubeyran & Kotaro Suzumura & Shlomo Weber, 2007. "Competition, Regulation And Welfare In The Presence Of Network Externalities," The Japanese Economic Review, Japanese Economic Association, vol. 58(1), pages 47-70, March.
  • Handle: RePEc:bla:jecrev:v:58:y:2007:i:1:p:47-70
    DOI: 10.1111/j.1468-5876.2007.00350.x
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