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.:
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Garance Genicot & Debraj Ray, 2003.
"Contracts and Externalities: How Things Fall Apart,"
Levine's Working Paper Archive
506439000000000235, David K. Levine.
- 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 and Debraj Ray, 2003. "Contracts and Externalities: How Things Fall Apart," Working Papers gueconwpa~03-03-30, Georgetown University, Department of Economics.
- 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.
- Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
- Michael D. Whinston & Ilya R. Segal, 2000. "Naked Exclusion: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 296-309, March.
- Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-33, 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.
- Milgrom, P. & Shannon, C., 1991.
"Monotone Comparative Statics,"
11, Stanford - Institute for Thoretical Economics.
- Moller, Marc, 2007. "The timing of contracting with externalities," Journal of Economic Theory, Elsevier, vol. 133(1), pages 484-503, March.
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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.