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On a Stackelberg leader's incentive to invite entry into horizontally differentiated oligopolies with network externalities: A reexamination

Author

Listed:
  • Ryoma Kitamura

    (Faculty of Economics, Otemon Gakuin University)

  • Tsuyoshi Toshimitsu

    (School of Economics, Kwansei Gakuin University)

Abstract

We develop a model of horizontally differentiated oligopolies with network externalities and reconsider a Stackelberg leader's incentive to invite entry, a problem previously examined by Economides (1996) and Kim (2002). We demonstrate that a Stackelberg leader has (does not have) an incentive to invite entry if the degree of network externalities is larger (smaller) than that of the product substitutability, such that a follower's profit increases (decreases).

Suggested Citation

  • Ryoma Kitamura & Tsuyoshi Toshimitsu, 2020. "On a Stackelberg leader's incentive to invite entry into horizontally differentiated oligopolies with network externalities: A reexamination," Discussion Paper Series 203, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:203
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    References listed on IDEAS

    as
    1. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    2. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    3. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
    4. Kim, Jaehong, 2002. "Product differentiation and network externality: a comment on Economides: "Network externalities, complementarities, and invitations to enter" [Eur. J. Political Economy 12 (1996) 211-233]," European Journal of Political Economy, Elsevier, vol. 18(2), pages 397-399, June.
    5. Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
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    Cited by:

    1. Toshimitsu, Tsuyoshi, 2020. "Does an incumbent monopolist have an incentive to invite new entry through granting a free patent license?," Research in Economics, Elsevier, vol. 74(4), pages 349-353.

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    More about this item

    Keywords

    Network externality; Horizontally differentiated oligopoly; Stackelberg competition; Entry; Passive expectation; Responsive expectation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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