On the role of consumer expectations in markets with network effects
We analyze the role of consumer expectations in a Hotelling model of price competition when products exhibit network effects. Expectations can be strong (stubborn), weak (price-sensitive) or partially stubborn (a mix of weak and strong). As a rule, the price-sensitivity of demand declines when expectations are more stubborn. An increase of stubbornness i) reduces competition, ii) increases (decreases) the parameter region with a unique duopoly equilibrium (multiple equilibria), iii) reduces the conflict between consumer and social preferences for de facto standardization, and iv) reduces the misalignment between consumer and social preferences for compatibility.
|Date of creation:||2010|
|Contact details of provider:|| Postal: +49 211 81-13820|
Phone: +49 211 81-15494
Fax: +49 211 81-15499
Web page: http://www.dice.hhu.de/en.html
More information through EDIRC
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.:
- Eirik Kristiansen & Marcel Thum, 1997. "R&D incentives in compatible networks," Journal of Economics, Springer, vol. 65(1), pages 55-78, February.
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, 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.
- GRILO, Isabel & SHY, Oz & THISSE, Jacques-François, "undated". "Price competition when consumer behavior is characterized by conformity or vanity," CORE Discussion Papers RP 1518, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Baake, Pio & Boom, Anette, 2001.
"Vertical product differentiation, network externalities, and compatibility decisions,"
International Journal of Industrial Organization,
Elsevier, vol. 19(1-2), pages 267-284, January.
- Anette Boom & Pio Baake, "undated". "Vertical Product Differentiation, Network Externalities, and Compatibility Decisions," Papers 010, Departmental Working Papers.
When requesting a correction, please mention this item's handle: RePEc:zbw:dicedp:13. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.