Network externalities, discrete demand shifts, and submarginal-cost pricing

Makoto Yano and Fumio Dei

Canadian Journal of Economics, 2006, vol. 39, issue 2, 455-476

Abstract: The introduction of a new product often causes a massive (discrete) demand shift to the new product. This study demonstrates that if a large-scale demand shift to a new product is accompanied by network externalities, it may result in `submarginal-cost pricing,' by which the seller sets its price below the marginal cost. This finding casts new light on dumping and safeguard issues in the real world.

JEL-codes: D42 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (7)

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