Network externalities and endogenous timing in managerial firms

Kangsik Choi and DongJoon Lee

Managerial and Decision Economics, 2022, vol. 43, issue 5, 1462-1475

Abstract: We investigate the choice of endogenous timing in the presence of network externalities under Bertrand competition. Contrary to the results of sequentiality in equilibrium, we demonstrate that when managers are being delegated both the market and timing decision, there exists a unique simultaneous move in equilibrium regardless of network externalities. However, when the choice of timing remains in the owners' hands, if the network externalities are weak (strong), it involves sequential (simultaneous) equilibrium. Consequently, from the viewpoint of social welfare and consumer surplus, Pareto superiority can be obtained endogenously when the strength of network externalities is strong.

Date: 2022
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https://doi.org/10.1002/mde.3467

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:43:y:2022:i:5:p:1462-1475

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