A Steady State Approach to a Network Externality Market With Switching Costs
We study duopoly pricing in the market for mobile phone service, which features network externalities, switching costs, and consumer heterogeneity. We introduce a steady state approach that enables a tractable analysis without endgame effects. The model can generate a variety of testable predictions, of which we focus on the comparative statics with respect to switching costs. Using data on the mobile phone service industries in 52 countries, we use the variation in market structure at the time switching costs were suddenly reduced by the regulatory imposition of mobile number portability (MNP). Firms that grew more rapidly prior to MNP respond to MNP by pricing more aggressively; firms facing large competitors respond less aggressively. Exploration of the model and its implications is an object of ongoing research.
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- 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).
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- repec:cup:cbooks:9780521805001 is not listed on IDEAS
- repec:cup:cbooks:9780521800952 is not listed on IDEAS
- Doganoglu Toker & Grzybowski Lukasz, 2013. "Dynamic Duopoly Competition with Switching Costs and Network Externalities," Review of Network Economics, De Gruyter, vol. 12(1), pages 1-25, March.
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