Compatibility, Intellectual Property, Innovation and Welfare in Durable Goods Markets with Network E§ects

Thanos Athanasopoulos

No 270241, Economic Research Papers from University of Warwick - Department of Economics

Abstract: This article investigates dominant Örmsí approach towards the compatibility of their durable network goods with that of a future, innovative rival in the presence of overlapping generations of forward-looking consumers and the welfare e§ects from dominant Örmsí refusals to support compatibility. I consider sequential, substitutable product innovations, where a rival can build on a dominant Örmís existing knowledge. For moderately innovative future products, the market leader supports compatibility because strategic pricing allows him to extract more of the higher total surplus that emerges when compatibility is present. Incompatible networks increase consumer surplus and there is no market failure when network e§ects are weak.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 28
Date: 2015-09-10
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:270241

DOI: 10.22004/ag.econ.270241

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