Network Markets and Consumer Coordination

Attila Ambrus () and Rosella Argenziano ()
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Attila Ambrus: Department of Economics,Harvard University, Cambridge
Rosella Argenziano: Department of Economics, Yale University, New Haven

No 423, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: This paper analyzes pricing decisions and competition in network markets, assuming that groups of consumers can coordinate their choices when it is in their interest, if coordination does not require communication. It is shown that multiple asymmetric networks can coexist in equilibrium. A monopolist might operate multiple ex ante identical networks to price differentiate. In Bertrand competition different firms might target high reservation value consumers on different sides of the market. Firms can obtain positive profits in price competition. Product differentiation in equilibrium is endogenized by consumers' network choices. Enough heterogeneity in reservation values is necessary for existence of these asymmetric equilibria.

Keywords: two-sided markets; network externalities; platform competition; coordination (search for similar items in EconPapers)
JEL-codes: D43 D62 L11 L14 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2004-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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