Format:
Online-Ressource
ISSN:
1935-1704
Content:
Abstract: This paper incorporates network externalities into a model of vertical product differentiation to examine how firms determine product quality and network size. We show that, with significant network benefits from quality improvement, the effects of network externalities differ depending on the type of competition. In response to an increase in network externalities, vertical product differentiation enlarges under price competition but shrinks under quantity competition. Moreover, under price competition, the network size of a high-quality product increases, whereas that of a low-quality product decreases for a sufficiently large extent of network externalities, resulting in a reversal in the leading position in terms of network size from the low- to the high-quality product. By contrast, the network sizes of high- and low-quality products both increase under quantity competition; moreover, the gap between their network sizes shrinks for a sufficiently large extent of network externalities.
In:
volume:23
In:
number:1
In:
year:2022
In:
pages:259-289
In:
extent:31
In:
The B.E. journal of theoretical economics, Berlin ; Boston, Mass. : De @Gruyter, 2007-, 23, Heft 1 (2022), 259-289 (gesamt 31), 1935-1704
Language:
English
DOI:
10.1515/bejte-2020-0188
URN:
urn:nbn:de:101:1-2023012013160346886797
URL:
https://doi.org/10.1515/bejte-2020-0188
URL:
https://nbn-resolving.org/urn:nbn:de:101:1-2023012013160346886797
URL:
https://d-nb.info/1278718192/34
Bookmarklink