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Network externalities and endogenous timing in managerial firms

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  • Kangsik Choi
  • DongJoon Lee

Abstract

We investigate the choice of endogenous timing in the presence of network externalities under Bertrand competition. Contrary to the results of sequentiality in equilibrium, we demonstrate that when managers are being delegated both the market and timing decision, there exists a unique simultaneous move in equilibrium regardless of network externalities. However, when the choice of timing remains in the owners' hands, if the network externalities are weak (strong), it involves sequential (simultaneous) equilibrium. Consequently, from the viewpoint of social welfare and consumer surplus, Pareto superiority can be obtained endogenously when the strength of network externalities is strong.

Suggested Citation

  • Kangsik Choi & DongJoon Lee, 2022. "Network externalities and endogenous timing in managerial firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1462-1475, July.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:5:p:1462-1475
    DOI: 10.1002/mde.3467
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