Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Wednesday, December 11, 2013

Dynamic Network Competition

Hanna Halaburda (Bank of Canada),  Bruno Jullien (Toulouse School of Economics) and Yaron Yehezkel (Tel Aviv University) have posted Dynamic Network Competition.

ABSTRACT: This paper considers a dynamic platform competition in a market with network externalities. We ask two research questions. The first one asks how the beliefs advantage carries over in time, and whether a low-quality platform can maintain its focal position along time. We show that for very high and very low discount factors it is possible for the low-quality platform to maintain its focal position indefinitely. But for the intermediate discount factor the higher quality platform wins and keeps the market. The second question asks what drives changes in the market leadership along time (observed in many markets, like smartphones and video-game consoles), and how such changes can be supported as a dynamic equilibrium outcome. We offer two explanations. The first explanation relies on intrinsic equilibrium uncertainty. The second explanation relies on the adoption of technology. One could expect such change in the market le! ader to be a sign of intense competition between platforms. However, we find that changes in leadership indicate softer price competition.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/12/dynamic-network-competition.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef019b001cf729970b

Listed below are links to weblogs that reference Dynamic Network Competition:

Comments

Post a comment