Competition in the Korean Internet Portal Market: Network Effects, Profit, and Market Efficiency

Junseok Hwang, Dongook Choi, Jongeun Oh and Yeonbae Kim ()
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Yeonbae Kim: Technology Management, Economics and Policy Program(TEMEP), Seoul National University

No 200925, TEMEP Discussion Papers from Seoul National University; Technology Management, Economics, and Policy Program (TEMEP)

Abstract: Internet portals serve as platforms that coordinate advertising and user markets, and the portal market features network effects within and between both sides. We model the market structure in order to explain network effects and other factors of competition such as prices for advertisements, contents, and differentiated services offered. We empirically identify these effects with data from South Korea and analyze the role of the effects in terms of profit and market efficiency. The results indicate that a negative indirect network effect exists in the user market but is prevailed over by the direct network effect. This explains how Internet portals make profits by increasing user visits. Further, we show the existence of network effects causes consumer¡¯s surplus not to decrease with market concentration.

Keywords: Internet Portal Industry; Network Effect; Two-sided Market; Market Efficiency (search for similar items in EconPapers)
JEL-codes: D21 H25 H32 L11 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-10, Revised 2009-11
New Economics Papers: this item is included in nep-com, nep-ict, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
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Published in Springer, Review of Industrial Organization (later version of this paper)

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Persistent link: https://EconPapers.repec.org/RePEc:snv:dp2009:200925

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