Quality improvement and network externalities
We analyse the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which quality improvement occurs as a result of this competition.
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- Anette Boom & Pio Baake, .
"Vertical Product Differentiation, Network Externalities, and Compatibility Decisions,"
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385, Massachusetts Institute of Technology (MIT), Department of Economics.
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"Sequential Entry with Brand Loyalty Caused by Consumer Learning-by-Using,"
Papiers d'Economie MathÃ©matique et Applications
92-17, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
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- GABSZEWICZ, Jean J. & PEPALL, Lynne & THISSE, Jacques-François, . "Sequential entry with brand loyalty caused by consumer learning-by-using," CORE Discussion Papers RP 1018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Bental, Benjamin & Spiegel, Menahem, 1995. "Network Competition, Product Quality, and Market Coverage in the Presence of Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 197-208, June.
- Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
- Shy, Oz, 1996. "Technology revolutions in the presence of network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 785-800, October.
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