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Negative network effects and asymmetric pure price equilibria

Author

Listed:
  • Renato Soeiro

    (University of Porto and Inesc Tec)

  • Alberto A. Pinto

    (University of Porto and Inesc Tec)

Abstract

We show that in finite settings with identical firms and consumers, asymmetric pure price equilibria with positive profits exist. We consider a price competition duopoly for a homogeneous product. Demand stems from a second-stage consumption game at posted prices, with consumers’ behavior impacted by negative network effects. We characterize equilibrium prices and demand. In all subgame-perfect pure price equilibria, both firms have positive profits, and in some, firms charge different prices.

Suggested Citation

  • Renato Soeiro & Alberto A. Pinto, 2023. "Negative network effects and asymmetric pure price equilibria," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(1), pages 99-124, January.
    • Handle: RePEc:spr:portec:v:22:y:2023:i:1:d:10.1007_s10258-021-00199-3
    DOI: 10.1007/s10258-021-00199-3
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    References listed on IDEAS

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