Network Externalities and Market Dominance

• 成果类型: Article
• 署名作者: Akerlof, Robert; Holden, Richard; Rayo, Luis
• 署名单位: University of Warwick; Centre for Economic Policy Research - UK; University of New South Wales Sydney; Northwestern University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.02894
• 发表日期: 2024
• 页码: 4037-4050
• 关键词: economics; economic theories and analysis pricing; analytic modeling

摘要

We propose a monopoly and Stackelberg duopoly model for new economy markets-with a Beckerian S-shaped demand curve at its center-that allows for intermediate degrees of firm focality and consumer heterogeneity. Because of network externalities, firms compete for the dominant market share, rather than the marginal consumer. This leads to a type of limit pricing-from within, rather than from outside the market- where the nondominant firm captures a positive market share that serves as a consolation prize. We characterize how firms' technologies, consumer impulses (which might be influenced by past sales, defaults, or advertising), and network externalities affect competition, and derive implications for firm strategy. Broadly speaking, we find that the dominant firm should adopt an aggressive top-dog stance (akin to, but not identical to, that of a firm seeking to deter rival entry), whereas the nondominant firm should respond with an accommodating puppy-dog approach.