Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, May 9, 2014

Endogenous product compatibility choice under Cournot competition with a network externality

Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) discuss Endogenous product compatibility choice under Cournot competition with a network externality.

ABSTRACT: We provide a simple model of endogenous product compatibility choice under Cournot competition with a network externality. Using the model, we consider how the degree of a network externality and product substitutability affects the choice regarding product compatibility. In particular, if the degree of the network externality is larger than that of the product substitutability, there exist multiple equilibria, involving imperfect, partial, and perfect compatibility. However, if another assumption formula regarding a spillover effect, which is a component of network size, is made, i.e., the converter case, there is a unique equilibrium, i.e., perfect compatibility, irrespective of the degree of the network effect versus product substitutability. Furthermore, we show that a perfectly compatible product standard is socially optimal and analyze, therefore, whether a social dilemma arises in the network products market.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/05/endogenous-product-compatibility-choice-under-cournot-competition-with-a-network-externality-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef01a73d915d1f970d

Listed below are links to weblogs that reference Endogenous product compatibility choice under Cournot competition with a network externality :

Comments

Post a comment