A note on the equilibrium of a monopoly providing a pure network good and the stand-alone effect: A reconsideration of the coordination problem

Tsuyoshi Toshimitsu

No 236, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: In this note, we reconsider the coordination problem in the case of a monopoly providing a pure network good, such as telecommunications: a problem previously examined by Rohlfs (1974). As in Lambertini and Orsini (2004), we find that the coordination problem relating to critical mass is not associated with the presence of network effects but is more the property of consumer expectations. Assuming a pure network good and passive expectations, we demonstrate this from the perspective of Rohlfs (1974; 2001), i.e., the coordination problem is associated with critical mass and the role of a stand-alone effect.

Keywords: pure network good; network effect; stand-alone value; critical mass; coordination problem; start-up problem; passive expectations; monopoly. (search for similar items in EconPapers)
JEL-codes: D42 D62 L12 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2022-04
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:236

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