Wednesday, April 23, 2014
Karl Morasch (Munich) examines Cooperation and competition in markets with network externalities or learning curves.
ABSTRACT: The related phenomena of learning curve and network effects are quite common in oligopolistic markets. In this context the present paper discusses the incentives of a technological leader to share its exclusive technology with potential competitors. An alliance may be preferable because partner firms may be blocked. On the other hand competition between the alliance partners will be intensified. It is shown that a alliance solution will be chosen for medium values of learning curve or network effects. In almost all cases where firms decide to form an alliance this well enhance welfare.