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Intrinsic quality improvements and network externalities

Author

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  • GABSZEWICZ, Jean J.
  • GARCIA, Filomena

Abstract

We analyze the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher intrinsic quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which intrinsic quality improvement occurs as a result of this competition.
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Suggested Citation

  • GABSZEWICZ, Jean J. & GARCIA, Filomena, 2007. "Intrinsic quality improvements and network externalities," LIDAM Reprints CORE 1999, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1999
    DOI: 10.1111/j.1742-7363.2007.00059.x
    Note: In : International Journal of Economic Theory, 3(4), 261-278, 2007
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    Cited by:

    1. Lioudmila Savtchenko, 2010. "Foreign devaluation as a coordinating device of heterogeneous investors: A game‐theoretic analysis of financial contagion," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(2), pages 195-204, June.
    2. Filomena Garcia & Cecilia Vergari, 2016. "Revealing Incentives for Compatibility Provision in Vertically Differentiated Network Industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(3), pages 720-749, September.
    3. Yi-Ling Cheng & Hsiang-Yun Huang, 2025. "Quality competition and product compatibility in network industries," Journal of Economics, Springer, vol. 145(1), pages 31-57, June.
    4. Zhao, Dan & Chen, Hongmin & Hong, Xianpei & Liu, Jingfang, 2014. "Technology licensing contracts with network effects," International Journal of Production Economics, Elsevier, vol. 158(C), pages 136-144.
    5. Montinaro, Marta & Scrimitore, Marcella, 2019. "Per unit and ad valorem royalties in a patent licensing game," MPRA Paper 96642, University Library of Munich, Germany.
    6. Montinaro, Marta & Pal, Rupayan & Scrimitore, Marcella, "undated". "Per Unit and Ad Valorem Royalties in a Patent Licensing Game," FACTS: Firms And Cities Towards Sustainability 307305, Fondazione Eni Enrico Mattei (FEEM) > FACTS: Firms And Cities Towards Sustainability.
    7. Garcia Filomena, 2013. "When Should a Monopolist Improve Quality in a Network Industry?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 381-414, September.
    8. Fei Yan & Hong-Zhuan Chen & Sahin Telli & Zhi-Chao Zhang, 2024. "Strategic Licensing Model Choice with Network Effects in a Dynamic Duopoly," Dynamic Games and Applications, Springer, vol. 14(3), pages 611-641, July.

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