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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- 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).
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