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New Network Goods

Author

Listed:
  • Leao, Joao
  • Santos, Vasco

Abstract

New horizontally-differentiated goods involving product-specific network effects are quite prevalent. Consumers market-wide preference for each of these goods typically is initially unknown. Later, as sales data begin to accumulate, agents learn market-wide preferences, which thus become common knowledge. We study such a market, pinpointing the factors which determine whether the market-wide preferred firm reinforces its lead as time elapses, penetration and under-cost pricing prevail, and first- or last-mover effects in market-wide preferences occur.

Suggested Citation

  • Leao, Joao & Santos, Vasco, 2003. "New Network Goods," FEUNL Working Paper Series wp439, Universidade Nova de Lisboa, Faculdade de Economia.
  • Handle: RePEc:unl:unlfep:wp439
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    File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2003/wp439.pdf
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    References listed on IDEAS

    as
    1. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Network effects; horizontal differentiation;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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