Avoiding market dominance: product compatibility in markets with network effects

被引:62
作者
Chen, Jiawei [1 ]
Doraszelski, Ulrich [2 ]
Harrington, Joseph E. [3 ]
机构
[1] Univ Calif Irvine, Irvine, CA 92717 USA
[2] Harvard Univ, Cambridge, MA 02138 USA
[3] Johns Hopkins Univ, Baltimore, MD 21218 USA
关键词
DYNAMICS; MODEL; CONVERTERS;
D O I
10.1111/j.1756-2171.2009.00073.x
中图分类号
F [经济];
学科分类号
02 ;
摘要
As is well recognized, market dominance is a typical outcome in markets with network effects. A firm with a larger installed base offers a more attractive product which induces more consumers to buy its product which produces a yet bigger installed base advantage. Such a setting is investigated here but with the main difference that firms have the option of making their products compatible. When firms have similar installed bases, they make their products compatible in order to expand the market. Nevertheless, random forces could result in one firm having a bigger installed base, in which case the larger firm may make its product incompatible. We find that strategic pricing tends to prevent the installed base differential from expanding to the point that incompatibility occurs. This pricing dynamic is able to neutralize increasing returns and avoid the emergence of market dominance.
引用
收藏
页码:455 / 485
页数:31
相关论文
共 30 条
[1]  
Anderson SP., 1992, DISCRETE CHOICE THEO
[2]  
[Anonymous], 2007, HDB IND ORG, DOI [10.1016/S1573-448X(06)03031-7, DOI 10.1016/S1573-448X(06)03031-7]
[3]   Capacity dynamics and endogenous asymmetries in firm size [J].
Besanko, D ;
Doraszelski, U .
RAND JOURNAL OF ECONOMICS, 2004, 35 (01) :23-49
[4]  
Besanko D., 2005, Learning-by-Doing, Organizational Forgetting, and Industry Dynamics
[5]   A MODEL OF THE EVOLUTION OF DUOPOLY - DOES THE ASYMMETRY BETWEEN FIRMS TEND TO INCREASE OR DECREASE [J].
BUDD, C ;
HARRIS, C ;
VICKERS, J .
REVIEW OF ECONOMIC STUDIES, 1993, 60 (03) :543-573
[6]   THE LEARNING-CURVE, MARKET DOMINANCE, AND PREDATORY PRICING [J].
CABRAL, LMB ;
RIORDAN, MH .
ECONOMETRICA, 1994, 62 (05) :1115-1140
[7]  
Cabral Luis., 2007, Dynamic Price Competition with Network Effects
[8]   The effects of mergers with dynamic capacity accumulation [J].
Chen, Jiawei .
INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION, 2009, 27 (01) :92-109
[9]   Do converters facilitate the transition to a new incompatible technology? A dynamic analysis of converters [J].
Choi, JP .
INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION, 1996, 14 (06) :825-835
[10]  
CHOI JP, 1997, J IND ECON, V45, P167