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Location Decisions of Competing Networks

Author

Listed:
  • Konstantinos Serfes
  • Eleftherios Zacharias

Abstract

Early entrants in markets with network effects usually occupy a “central location” and serve agents with “intermediate tastes,” whereas later entrants are niche players. Why would the first entrant choose to become a “general” network, given that later entrants will not have enough room for differentiation, resulting in a more intense competition for market share? In a Hotelling model with two rival networks, we show that for intermediate values of the network externality parameter the location equilibrium is indeed asymmetric: the first entrant locates at the center whereas the second entrant chooses an extreme (niche) location.

Suggested Citation

  • Konstantinos Serfes & Eleftherios Zacharias, 2012. "Location Decisions of Competing Networks," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(4), pages 989-1005, December.
    • Handle: RePEc:bla:jemstr:v:21:y:2012:i:4:p:989-1005
    DOI: j.1530-9134.2012.00349.x
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    References listed on IDEAS

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    1. Hyunho Kim & Konstantinos Serfes, 2006. "A Location Model With Preference For Variety," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 569-595, December.
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    Citations

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    Cited by:

    1. Jeong‐Yoo Kim, 2024. "Mixed duopoly in two‐sided markets," Manchester School, University of Manchester, vol. 92(3), pages 281-295, June.
    2. Luca Savorelli & Jacob Seifert, 2016. "Spatial competition and social welfare in the presence of non-monotonic network effects," Discussion Paper Series, School of Economics and Finance 201615, School of Economics and Finance, University of St Andrews, revised 06 Jun 2017.
    3. Takeshi Ebina & Katsumasa Nishide, 2024. "Sequential product positioning and entry timing under differential costs in a continuous-time model," Annals of Operations Research, Springer, vol. 332(1), pages 277-301, January.
    4. Kangsik Choi & DongJoon Lee, 2022. "Network externalities and endogenous timing in managerial firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1462-1475, July.
    5. Matsuhisa, Hiroshi & Matsubayashi, Nobuo, 2024. "Alliance formation between a platform retailer and competing manufacturers in sharing consumer data for product development," International Journal of Production Economics, Elsevier, vol. 267(C).
    6. Maria Alipranti & Emmanuel Petrakis, 2013. "Comparative Advertising in Markets with Network Externalities," Working Papers 1306, University of Crete, Department of Economics.
    7. Vitor Miguel Ribeiro, 2014. "Strategic delegation in two-sided markets," FEP Working Papers 536, Universidade do Porto, Faculdade de Economia do Porto.
    8. Vitor Miguel Ribeiro, 2014. "Establishing a link between behavior ecconomics and two-sided markets," FEP Working Papers 538, Universidade do Porto, Faculdade de Economia do Porto.
    9. Ribeiro, Vitor, 2015. "Endogenous unrestricted locations in markets with network effects," Economics Discussion Papers 2015-11, Kiel Institute for the World Economy.
    10. Wang, Wei & Lyu, Gaoyan, 2020. "Sequential product positioning on a platform in the presence of network effects," International Journal of Production Economics, Elsevier, vol. 229(C).
    11. Eleftherios Zacharias, 2013. "Strategic Positioning of Goods in a Market with a Niche," Working Paper series 36_13, Rimini Centre for Economic Analysis.
    12. Tolotti, Marco & Yepez, Jorge, 2020. "Hotelling-Bertrand duopoly competition under firm-specific network effects," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 105-128.

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