search query: @indexterm Network externalities / total: 20
reference: 14 / 20
| Author: | Baake, P. Boom, A. |
| Title: | Vertical product differentiation, network externalities, and compatibility decisions |
| Journal: | International Journal of Industrial Organization
2001 : JAN, VOL. 19:1-2, p. 267-284 |
| Index terms: | PRODUCT DIFFERENTIATION NETWORK EXTERNALITIES QUALITY |
| Language: | eng |
| Abstract: | The authors analyze the subgame perfect equilibrium of a four-stage game in a model of vertical product differentiation, where the consumer's evaluation of a product depends on its inherent quality and on its network's size. First, two firms choose their product's inherent quality. Then they may mutually agree on providing an adapter before competing in prices. Finally, consumers buy. The authors find that, despite the high quality firm's preference for incompatibility, an adapter is always provided in equilibrium. Social welfare is greater than without an adapter and can be improved by regulating compatibility only in those cases where qualities are differentiated too much. |
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