Intrinsic quality improvements and network externalities

Jean Gabszewicz and Filomena Garcia

International Journal of Economic Theory, 2007, vol. 3, issue 4, 261-278

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

Date: 2007
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https://doi.org/10.1111/j.1742-7363.2007.00059.x

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Working Paper: Intrinsic quality improvements and network externalities (2007)
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