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Network Markets and Consumer Coordination

Ambrus, Attila and Argenziano, Rosella Network Markets and Consumer Coordination. [UNSPECIFIED]

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This paper analyzes pricing decisions and competition in network markets, assuming that groups of consumers can coordinate their choices when it is in their interest, if coordination does not require communication. It is shown that multiple asymmetric networks can coexist in equilibrium. A monopolist might operate multiple ex ante identical networks to price differentiate. In Bertrand competition different firms might target high reservation value consumers on different sides of the market. Firms can obtain positive profits in price competition. Product differentiation in equilibrium is endogenized by consumers' network choices. Enough heterogeneity in reservation values is necessary for existence of these asymmetric equilibria.

Uncontrolled Keywords: D43, D62, L11, L14, two-sided markets, network externalities, platform competition, coordination
Subjects: H Social Sciences > HB Economic Theory
Depositing User: Jim Jamieson
Date Deposited: 28 Jun 2012 16:14
Last Modified: 09 Jan 2018 17:15

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