Non-monotonic network effects and market entry

Alexander Lundberg*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

The simple circular model of horizontal product differentiation, in which firms compete in price, is characterized by excessive firm entry in equilibrium. When non-monotonic network effects are present, this result no longer holds. If consumers differ in their optimal number of other consumers choosing their same good, entry in equilibrium can be insufficient.

Original languageEnglish (US)
Pages (from-to)146-149
Number of pages4
JournalEconomics Letters
Volume137
DOIs
StatePublished - Dec 1 2015
Externally publishedYes

Keywords

  • Fixed costs
  • Free entry
  • Network effects
  • Non-monotonicity
  • Product differentiation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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