Strategic compatibility choice, network alliance, and welfare

Tsuyoshi Toshimitsu

No 164, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: Based on a simple model of compatibility choice under differentiated Cournot duopoly with network externalities, we consider how the levels of a network externality and product substitutability affect the choice of compatibility. In particular, if the level of network externality is larger than that of product substitutability, there are multiple equilibria involving imperfect and perfect compatibility. Furthermore, we demonstrate the conditions for constructing such a network alliance so that firms provide perfectly compatible products. The network alliance is stable and socially optimal.

Keywords: Compatibility; Network Externality; Fulfilled Expectation; Cournot Competition; Horizontally Differentiated Product; Network Alliance (search for similar items in EconPapers)
JEL-codes: D21 D43 D62 L15 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2017-07, Revised 2017-07
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://192.218.163.163/RePEc/pdf/kgdp164.pdf First version, 2017 (application/pdf)

Related works:
Journal Article: Strategic Compatibility Choice, Network Alliance, and Welfare (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:164

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