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On the incentive to attract competition with network effects

Author

Listed:
  • Gyu Ho Wang
  • Chongmin Kim

Abstract

In this paper, we study the incumbent's incentive to share its essential facility when there exist network effects. We show that without network effects, the incumbent will charge an access fee high enough to deter the entry. with network effects, however, the incumbent always has an incentive to invite entry. We also show that if the potential entrant has to pay the entry cost, the incumbent has an incentive to subsidize the entrant with a low access fee

Suggested Citation

  • Gyu Ho Wang & Chongmin Kim, 2004. "On the incentive to attract competition with network effects," Econometric Society 2004 Far Eastern Meetings 572, Econometric Society.
    • Handle: RePEc:ecm:feam04:572
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    More about this item

    Keywords

    Network effects; Foreclosure; Essential facility; Access charge;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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