Interconnecting Differentiated Networks
I examine interconnection decisions of differentiated firms. I find that previous results that firms never interconnect enough do not hold. In a Hotelling model consumers may suffer from interconnection, and firms may interconnect when it is not socially optimal. The firms interconnect too much when the network effects are steeper - this makes firms compete much less aggressively after interconnection, raising prices for consumers and profits for firms. Price and profit rise results holds under quality and installed base asymmetries, or only some firms in the industry interconnecting. More dimensions of differentiation make interconnection less attractive.
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.:
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-FranÃ§ois, 1997.
"Price competition when consumer behavior is characterized by conformity or vanity,"
CORE Discussion Papers
1997032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001. "Price competition when consumer behavior is characterized by conformity or vanity," Journal of Public Economics, Elsevier, vol. 80(3), pages 385-408, June.
- Filomena, GARCIA & Cecilia, VERGARI, 2008.
"Compatibility Choice in vertically differentiated technologies,"
Discussion Papers (ECON - Département des Sciences Economiques)
2008012, Université catholique de Louvain, Département des Sciences Economiques.
- GARCIA, Filomena & VERGARI, Cecilia, 2008. "Compatibility choice in vertically differentiated technologies," CORE Discussion Papers 2008014, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Neil Gandal, 2002. "Compatibility, Standardization, and Network Effects: Some Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 80-91, Spring.
- Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer.
- Irina Suleymanova & Christian Wey, 2008.
"Bertrand Competition in Markets with Network Effects and Switching Costs,"
Discussion Papers of DIW Berlin
796, DIW Berlin, German Institute for Economic Research.
- Suleymanova Irina & Wey Christian, 2011. "Bertrand Competition in Markets with Network Effects and Switching Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-58, September.
- Suleymanova, Irina & Wey, Christian, 2011. "Bertrand competition in markets with network effects and switching costs," DICE Discussion Papers 30, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Eric Giraud-Héraud & Hakim Hammoudi & Mahdi Mokrane, 2003. "Multiproduct firm behaviour in a differentiated market," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 41-61, February.
- S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
When requesting a correction, please mention this item's handle: RePEc:net:wpaper:0807. 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: (Nicholas Economides)
If references are entirely missing, you can add them using this form.