A note on compatibility and entry in a circular model of product differentiation

Nicolas Jonard () and Eric Schenk ()
Additional contact information
Eric Schenk: LRPS, INSA Strasbourg and BETA, Universite Louis Pasteur

Economics Bulletin, 2004, vol. 12, issue 1, 1-9

Abstract: Consider an industry in which network goods are supplied by two horizontally differentiated firms facing the threat of a potential entrant. Firms' dilemma is between occupying the product space by selling very differentiated (incompatible) goods, and supplying compatible goods that offer higher utilities hence can be charged a higher price to consumers but are also closer substitutes. The compatibility-entry-price game is solved backward when firms and consumers are located on a circular product space. It turns out that strong externalities can favour entry, as merging the networks and accommodating entry can be preferred by the incumbents.

Keywords: compatibility (search for similar items in EconPapers)
JEL-codes: L0 L1 (search for similar items in EconPapers)
Date: 2004-01-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2004/Volume12/EB-03L00001A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-03l00001

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().