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Equilibrium in Competing Networks with Differentiated Products

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  • Andre de Palma
  • Luc Leruth

Abstract

We study “positive network externalities” in a horizontally differentiated industry. We show that a symmetric Nash equilibrium in prices exists if and only if the degree of product differentiation is sufficiently large. We also study the impact of larger or lower compatibility on equilibrium prices.
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Suggested Citation

  • Andre de Palma & Luc Leruth, 1989. "Equilibrium in Competing Networks with Differentiated Products," Discussion Papers 814, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:814
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    References listed on IDEAS

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    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
    2. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," Review of Economic Studies, Oxford University Press, pages 107-120.
    3. Gabszewicz, Jean Jaskold & Thisse, Jacques-Francois, 1986. "On the Nature of Competition with Differentiated Products," Economic Journal, Royal Economic Society, vol. 96(381), pages 160-172, March.
    4. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, pages 424-440.
    5. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    6. Farrell, Joseph & Saloner, Garth, 1986. "Standardization and variety," Economics Letters, Elsevier, vol. 20(1), pages 71-74.
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    1. repec:ebl:ecbull:v:12:y:2004:i:1:p:1-9 is not listed on IDEAS
    2. Michael Ehrmann & Marcel Fratzscher, 2009. "Explaining Monetary Policy in Press Conferences," International Journal of Central Banking, International Journal of Central Banking, vol. 5(2), pages 42-84, June.

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