IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Price and quality decisions under network effects

  • Navarro, Noemí

I analyse monopoly pricing and quality decisions under network effects. High quality premium and low quality punishment are found to depend on how the impact of marginal costs on quality relates to the intensity of the network effect and the optimism of the producer about final demand. More precisely, marginal costs have to be low enough (but not too low) with respect to the intensity of the network effects and/or the optimism about final demand so that higher prices reflect higher quality. A similar conclusion can be drawn about incentives for quality provision, whenever quality is considered endogenous together with price.

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.

File URL: http://www.sciencedirect.com/science/article/pii/S0304406812000420
Download Restriction: Full text for ScienceDirect subscribers only

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.

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 5 ()
Pages: 263-270

as
in new window

Handle: RePEc:eee:mateco:v:48:y:2012:i:5:p:263-270
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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.:

as in new window
  1. Nicholas Economides, 1997. "The Economics of Networks," Industrial Organization 9701002, EconWPA.
  2. Vettas, Nikolaos, 1997. "On the Informational Role of Quantities: Durable Goods and Consumers' Word-of-Mouth Communication," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 915-44, November.
  3. Luis Cabral & David Salant & Glenn Woroch, 1994. "Monopoly Pricing With Network Externalities," Industrial Organization 9411003, EconWPA.
  4. Bensaid, Bernard & Lesne, Jean-Philippe, 1996. "Dynamic monopoly pricing with network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 837-855, October.
  5. Wolinsky, Asher, 1983. "Prices as Signals of Product Quality," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 647-58, October.
  6. Noemí Navarro, 2008. "Quality provision under referral consumption," Working Papers 2008-12, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  7. 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.
  8. repec:hrv:faseco:4589709 is not listed on IDEAS
  9. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
  10. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, . "Price competition when consumer behavior is characterized by conformity or vanity," CORE Discussion Papers RP -1518, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Julia Liebeskind & Richard P. Rumelt, 1989. "Markets for Experience Goods with Performance Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 601-621, Winter.
  13. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
  14. Oz Shy, 2010. "A short survey of network economics," Working Papers 10-3, Federal Reserve Bank of Boston.
  15. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  16. Nikolaos Vettas, 1998. "Demand and Supply in New Markets: Diffusion with Bilateral Learning," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 215-233, Spring.
  17. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  18. Kyle Bagwell & Michael Riordan, 1988. "High and Declining Prices Signal Product Quality," Discussion Papers 808, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
  20. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  21. Jing, Bing, 2007. "Network externalities and market segmentation in a monopoly," Economics Letters, Elsevier, vol. 95(1), pages 7-13, April.
  22. Carl Shapiro, 1982. "Consumer Information, Product Quality, and Seller Reputation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 20-35, Spring.
  23. Griva, Krina & Vettas, Nikolaos, 2011. "Price competition in a differentiated products duopoly under network effects," Information Economics and Policy, Elsevier, vol. 23(1), pages 85-97, March.
  24. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
  25. Rossella Argenziano, 2008. "Differentiated networks: equilibrium and efficiency," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 747-769.
  26. S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
  27. Pigeard de Almeida Prado, Fernando & Belitsky, Vladimir & Ferreira, Alex Luiz, 2011. "Social interactions, product differentiation and discontinuity of demand," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 642-653.
  28. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
  29. NAVARRO, Noemí, 2006. "Asymmetric information, word-of-mouth and social networks: from the market for lemons to efficiency," CORE Discussion Papers 2006002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  30. Carl Shapiro, 1983. "Optimal Pricing of Experience Goods," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 497-507, Autumn.
  31. Fudenberg, Drew & Tirole, Jean, 2000. "Pricing a Network Good to Deter Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 373-90, December.
  32. Karni, Edi & Levin, Dan, 1994. "Social Attributes and Strategic Equilibrium: A Restaurant Pricing Game," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 822-40, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:48:y:2012:i:5:p:263-270. 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.