Quality Strategies in Network Markets

• 成果类型: Article
• 署名作者: Chan, Lester T.
• 署名单位: Xiamen University; Xiamen University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4792
• 发表日期: 2024
• 页码: 1992-2002
• 关键词: quality strategy; network market; Spence effect; Risk dominance; equilibrium selection

摘要

This paper studies network market problems in which firm(s)/platform(s) sets quality in addition to price. A well-established result in the network economics literature is that a profit-maximizing firm concerns only how quality is valued by the marginal consumer but not by inframarginal consumers, aka the Spence effect/distortion. For markets with strong network effects under which multiple market-tipping equilibria exist, I show that the validity of the previous result depends on the choice of the equilibrium selection criterion. Precisely, I show that all criteria commonly used in this literature give rise to the Spence effect, whereas the well-justified risk dominance criterion in game theory and its generalizations do not. Novel quality strategies are derived based on the latter criteria.