Network externalities, discrete demand shifts, and submarginal-cost pricing
The introduction of a new product often causes a massive (discrete) demand shift to the new product. This study demonstrates that if a large-scale demand shift to a new product is accompanied by network externalities, it may result in `submarginal-cost pricing,' by which the seller sets its price below the marginal cost. This finding casts new light on dumping and safeguard issues in the real world.
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Volume (Year): 39 (2006)
Issue (Month): 2 (May)
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