Differentiated networks: equilibrium and efficiency

• 成果类型: Article
• 署名作者: Argenziano, Rossella
• 署名单位: University of Essex
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/j.1756-2171.2008.00037.x
• 发表日期: 2008
• 页码: 747-769
• 关键词: product differentiation; externalities; standardization; selection

摘要

We consider a model of price competition in a duopoly with product differentiation and network effects. In the efficient allocation, both networks are active and the firm with the highest expected quality has the largest market share. To characterize the equilibrium allocation, we derive necessary and sufficient conditions for uniqueness of the equilibrium of the coordination game played by consumers for given prices. The equilibrium allocation differs from the efficient one for two reasons. First, the equilibrium allocation of consumers to the networks is too balanced, because consumers fail to internalize network externalities. Second, if access to the networks is priced by strategic firms, then the product with the highest expected quality is also the most expensive. This further reduces the asymmetry between market shares and therefore social welfare.