IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v54y2006i2p253-268.html
   My bibliography  Save this article

FUNCTIONAL DEGRADATION AND ASYMMETRIC NETWORK EFFECTS -super-

Author

Listed:
  • GERGELY CSORBA
  • JONG-HEE HAHN

Abstract

In markets subject to network effects, firms often remove some functions of their original products and sell a functionally-downgraded version at a lower or zero price. This paper aims to provide a pure network effect based explanation of such a practice. Building a functional degradation model with asymmetric network effects, we investigate when and why firms have incentives to introduce a functionally-degraded good and discuss its welfare implication. Copyright Blackwell Publishing Ltd. 2006.

Suggested Citation

  • Gergely Csorba & Jong-Hee Hahn, 2006. "FUNCTIONAL DEGRADATION AND ASYMMETRIC NETWORK EFFECTS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 54(2), pages 253-268, June.
  • Handle: RePEc:bla:jindec:v:54:y:2006:i:2:p:253-268
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-6451.2006.00282.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jong‐Hee Hahn, 2006. "Damaged durable goods," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 121-133, March.
    2. Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
    3. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    4. Takeyama, Lisa N, 1997. "The Intertemporal Consequences of Unauthorized Reproduction of Intellectual Property," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 511-522, October.
    5. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
    6. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    7. Hahn, Jong-Hee, 2003. "Nonlinear pricing of telecommunications with call and network externalities," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 949-967, September.
    8. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    9. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    10. Raymond J. Deneckere & R. Preston McAfee, 1996. "Damaged Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 149-174, June.
    11. Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 167-182, June.
    12. Takeyama, Lisa N, 2002. "Strategic Vertical Differentiation and Durable Goods Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 43-56, March.
    13. King, Stephen P. & Lampe, Ryan, 2003. "Network externalities, price discrimination and profitable piracy," Information Economics and Policy, Elsevier, vol. 15(3), pages 271-290, September.
    14. repec:rje:randje:v:37:y:2006:1:p:121-133 is not listed on IDEAS
    15. Fudenberg, Drew & Tirole, Jean, 2000. "Pricing a Network Good to Deter Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 373-390, December.
    16. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    17. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
    18. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    19. Michael Waldman, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 273-283.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107069978, May.
    2. Böhme Enrico, 2016. "Second-Degree Price Discrimination on Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 15(2), pages 91-115, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:54:y:2006:i:2:p:253-268. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.