Quality improvement and network externalities

Jean Gabszewicz () and Filomena Garcia ()

No 2005096, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We analyse the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which quality improvement occurs as a result of this competition.

Keywords: vertical product differentiation; network externalities; quality improvement (search for similar items in EconPapers)
JEL-codes: L11 L12 L15 (search for similar items in EconPapers)
Date: 2005-01-01
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Working Paper: Quality improvement and network externalities (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:cor:louvco:2005096

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