Contracting with asymmetric information in the presence of positive network effects: Screening and divide-and-conquer techniques
This paper shows how pessimistic expectations reduce the effectivity of monopolist screening techniques with positive network effects, and demonstrates how divide-and-conquer strategies can solve the consumers' coordination problem. In the sequential mechanism, different expectations about future network size become relevant in the incentive constraints of different consumer types. Screening consumers is less costly in later periods, so pooling may be beneficial in early stages of contracting. The joint presence of asymmetric information and positive network effects yields a strict downward distortion from the welfare-maximizing quantity scheme, while unique implementation has further downward distorting effects.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
- Genicot, Garance & Ray, Debraj, 2006.
"Contracts and externalities: How things fall apart,"
Journal of Economic Theory,
Elsevier, vol. 131(1), pages 71-100, November.
- Garance Genicot & Debraj Ray, 2003. "Contracts and Externalities: How Things Fall Apart," Levine's Working Paper Archive 506439000000000235, David K. Levine.
- Garance Genicot and Debraj Ray, 2003. "Contracts and Externalities: How Things Fall Apart," Working Papers gueconwpa~03-03-30, Georgetown University, Department of Economics.
- Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-233, March.
- Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-180, January.
- Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
- Moller, Marc, 2007. "The timing of contracting with externalities," Journal of Economic Theory, Elsevier, vol. 133(1), pages 484-503, March.
- Segal, Ilya, 2003. "Coordination and discrimination in contracting with externalities: divide and conquer?," Journal of Economic Theory, Elsevier, vol. 113(2), pages 147-181, December.
- Baglioni Angelo, 2008. "Entry into a Network Industry: Consumers' Expectations and Firms' Pricing Policies," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-13, July.
- Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:iepoli:v:20:y:2008:i:1:p:54-66. 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: (Dana Niculescu)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.