Subsidising network technology adoption the case of publishers and E-readers
To market a new network technology effectively, manufacturers need to understand the structure and size of network effects associated with the product. If consumers' surplus from adoption depends positively on the number of interconnections in the network, early adopters may need to be subsidized until a critical mass is reached. Moreover, in a two-sided market where platforms and complementary contents are constrained to non-negative prices, subsidies can be provided both by platform manufacturers and byproducers of complementary contents. The article presents a model to analyse adoption dynamics with different subsidies and different stand-alone values for technology. The model shows that if the standalone value of technology is limited, subsidies from complementary contents producers may be pivotal to reach the critical mass. Moreover, under given conditions, this type of subsidies can lead to a more efficient adoption, increasing social welfare. In this case, assuming a monopolist platform manufacturer of the technology, complete contracts are needed to reach the Pareto optimal equilibrium.
|Date of creation:||11 Jun 2012|
|Note:||View the original document on HAL open archive server: https://hal-mines-paristech.archives-ouvertes.fr/hal-00714447|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
- Jean-Charles Rochet & Jean Tirole, 2014.
"Platform Competition in Two-Sided Markets,"
Competition Policy International, vol. 10.
- Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform competition in two sided markets," LSE Research Online Documents on Economics 24929, London School of Economics and Political Science, LSE Library.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Matthew Gentzkow, 2006. "Valuing New Goods in a Model with Complementarities: Online Newspapers," NBER Working Papers 12562, National Bureau of Economic Research, Inc.
- Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
- Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," CEPR Discussion Papers 5798, C.E.P.R. Discussion Papers.
- Farrell, Joseph & Klemperer, Paul, 2006. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Competition Policy Center, Working Paper Series qt9n26k7v1, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Joseph Farrell & Paul Klemperer, 2006. "Co-ordination and Lock-in: Competition with Switching Costs and Network Effects," Economics Papers 2006-W07, Economics Group, Nuffield College, University of Oxford.
- Stephen Ryan & Catherine Tucker, 2012. "Heterogeneity and the dynamics of technology adoption," Quantitative Marketing and Economics (QME), Springer, vol. 10(1), pages 63-109, March.
- Stephen Ryan & Catherine Tucker, 2006. "Heterogeneity and the Dynamics of Technology Adoption," Working Papers 06-26, NET Institute, revised Oct 2006.
- Stephen P. Ryan & Catherine Tucker, 2011. "Heterogeneity and the Dynamics of Technology Adoption," NBER Working Papers 17253, National Bureau of Economic Research, Inc.
- Olivier P. Bomsel, 2013. "Copyright And Brands In The Digital Age: Internalizing The Externalities Of Meaning," Contemporary Economic Policy, Western Economic Association International, vol. 31(1), pages 126-134, 01.
- Olivier Bomsel, 2013. "Copyright and brands in the digital age: Internalizing the externalities of meaning," Post-Print hal-00498365, HAL.
- Rochet, Jean Charles & Tirole, Jean, 2008. "Tying in two-sided markets and the honor all cards rule," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1333-1347, November.
- Rochet, Jean-Charles & Tirole, Jean, 2006. "Tying in Two-Sided Markets and the Honor All Cards Rule," IDEI Working Papers 440, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2007.
- Rochet, Jean-Charles & Tirole, Jean, 2007. "Tying-in Two-Sided Markets and the Honour All Cards Rule," CEPR Discussion Papers 6132, C.E.P.R. Discussion Papers.
- Matthew Gentzkow & Jesse M. Shapiro, 2011. "Ideological Segregation Online and Offline," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1799-1839.
- Matthew Gentzkow & Jesse M. Shapiro, 2010. "Ideological Segregation Online and Offline," NBER Working Papers 15916, National Bureau of Economic Research, Inc.
- Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
- Olivier Bomsel & Heritiana Ranaivoson, 2009. "Decreasing Copyright Enforcement Costs: The Scope of a Gradual Response," Post-Print hal-00446189, HAL.
- George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
- Catherine Tucker, 2008. "Identifying Formal and Informal Influence in Technology Adoption with Network Externalities," Management Science, INFORMS, vol. 54(12), pages 2024-2038, December.
- Randal Heeb, 2003. "Randal Heeb Innovation and Vertical Integration in Complementary Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 387-417, 09. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00714447. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.