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 language | English (US) |
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Pages (from-to) | 146-149 |
Number of pages | 4 |
Journal | Economics Letters |
Volume | 137 |
DOIs | |
State | Published - Dec 1 2015 |
Keywords
- Fixed costs
- Free entry
- Network effects
- Non-monotonicity
- Product differentiation
ASJC Scopus subject areas
- Finance
- Economics and Econometrics