IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v54y2006i4p527-567.html
   My bibliography  Save this article

COMPATIBILITY INCENTIVES OF A LARGE NETWORK FACING MULTIPLE RIVALS -super-

Author

Listed:
  • DAVID A. MALUEG
  • MARIUS SCHWARTZ

Abstract

Under network effects, we analyze when a firm with the largest market share of installed-base customers prefers incompatibility with smaller rivals that are themselves compatible. With incompatibility, consumers realize that intra-network competition makes the rivals' network more aggressive than a single-firm network in adding customers. Consequently, under incompatibility the unique equilibrium can entail tipping away from the largest firm whatever its market share. The largest firm is more likely to prefer incompatibility as its share rises (above fifty per cent is necessary) or the potential to add consumers falls; the number of rivals and strength of network effects have ambiguous implications. Copyright Blackwell Publishing Ltd. 2006.

Suggested Citation

  • David A. Malueg & Marius Schwartz, 2006. "COMPATIBILITY INCENTIVES OF A LARGE NETWORK FACING MULTIPLE RIVALS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 527-567, December.
  • Handle: RePEc:bla:jindec:v:54:y:2006:i:4:p:527-567
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-6451.2006.00299.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. Nicholas Economides & Fredrick Flyer, 1997. "Compatibility and Market Structure for Network Goods," Working Papers 98-02, New York University, Leonard N. Stern School of Business, Department of Economics.
    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. María Fernanda Viecens, 2009. "Compatibility with Firm Dominance," Working Papers 2009-12, FEDEA.
    2. P. Dogan, "undated". "Vertical Networks, Integration, and Connectivity," Working Paper 33644, Harvard University OpenScholar.
    3. Corts, Kenneth S. & Lederman, Mara, 2009. "Software exclusivity and the scope of indirect network effects in the U.S. home video game market," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 121-136, March.
    4. Norbäck, Pehr-Johan & Persson, Lars & Tå̊g, Joacim, 2014. "Acquisitions, entry, and innovation in oligopolistic network industries," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 1-12.
    5. Ramon Casadesus-Masanell & Francisco Ruiz-Aliseda, 2008. "Platform Competition, Compatibility, and Social Efficiency," Working Papers 08-32, NET Institute.
    6. Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2009. "Avoiding market dominance: product compatibility in markets with network effects," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 455-485.
    7. Sjaak Hurkens & Angel L. Lopez, 2010. "Mobile Termination, Network Externalities, and Consumer Expectations," Working Papers 441, Barcelona Graduate School of Economics.
    8. Viecens María Fernanda, 2011. "Compatibility with Firm Dominance," Review of Network Economics, De Gruyter, vol. 10(4), pages 1-27, December.
    9. Athanasopoulos, Thanos, 2014. "Compatibility, Intellectual Property,Innovation and Welfare in Durable Goods Markets with Network Effects," The Warwick Economics Research Paper Series (TWERPS) 1043, University of Warwick, Department of Economics.
    10. Alexei Alexandrov, 2015. "Anti-Competitive Interconnection: the effects of the elasticity of consumers' expectations and the shape of the network effects function," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 74-99, March.
    11. Christiaan Hogendorn & Stephen Ka Yat Yuen, 2009. "PLATFORM COMPETITION WITH 'MUST-HAVE' COMPONENTS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(2), pages 294-318, June.
    12. Filomena Garcia & Cecilia Vergari, 2016. "Revealing Incentives for Compatibility Provision in Vertically Differentiated Network Industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 720-749, September.

    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:4:p:527-567. 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.