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Do Consumers Always Gain When More People Buy The Same Brand?

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  • SHY, O.
  • CHOU, C-F.

Abstract

We analyze markets for goods in which the consumer's value for a specific brand increases with an increase in the variety of the brand's specific supporting services. We demonstrate that consumers are not always better off with an increase in the number of consumers purchasing the same brand even though the variety of the brand specific supporting services may increase. The paper also analyzes the effects of changing the distribution of consumer tastes on the market shares of brand producing firms and the variety of services supporting each brand. Then, we ask whether consumers and firms benefit from having supporting services that are compatible with all brands.
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Suggested Citation

  • Shy, O. & Chou, C-F., 1990. "Do Consumers Always Gain When More People Buy The Same Brand?," Papers 40-90, Tel Aviv.
    • Handle: RePEc:fth:teavfo:40-90
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    Cited by:

    1. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    2. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    3. Desruelle, Dominique & Gaudet, Gerard & Richelle, Yves, 1996. "Complementarity, coordination and compatibility: The role of fixed costs in the economics of systems," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 747-768, October.

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