A note on the equilibrium of a monopoly providing a pure network good and the stand-alone effect: A reconsideration of the coordination problem

In this note, we reconsider the coordination problem in the case of a monopoly providing a pure network good, such as telecommunications: a problem previously examined by Rohlfs (1974). As in Lambertini and Orsini (2004), we find that the coordination problem relating to critical mass is not associated with the presence of network effects but is more the property of consumer expectations. Assuming a pure network good and passive expectations, we demonstrate this from the perspective of Rohlfs (1974; 2001), i.e., the coordination problem is associated with critical mass and the role of a stand-alone effect.