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Price Competition in a Differentiated Products Duopoly Under Network Effects

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  • Vettas, Nikolaos
  • Griva, Krina

Abstract

We examine price competition under product-specific network effects, in a duopoly where the products are differentiated horizontally and vertically. When consumers' expectations are not affected by prices, firms may share the market equally, or one firm (possibly the low-quality one) may capture the entire market. When product qualities are different, we may also have interior asymmetric equilibria. With expectations affected by prices, firms' competition becomes more intense and the high quality firm captures a larger market share.

Suggested Citation

  • Vettas, Nikolaos & Griva, Krina, 2004. "Price Competition in a Differentiated Products Duopoly Under Network Effects," CEPR Discussion Papers 4574, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4574
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    More about this item

    Keywords

    Network effects; Product differentiation; Product variety; Quality; Price competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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