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On consumer expectations in a network goods market: The monopoly case

Tsuyoshi Toshimitsu

Economics Bulletin, 2017, vol. 37, issue 1, 488-493

Abstract: We reconsider the effects of consumer expectations on the fulfilled expectations equilibrium in a network goods market. Based on a simple monopoly model incorporating network externalities, we examine how the degree of commitment of consumer expectations, conversely, the degree of the monopolist's commitment to actual output, affects outcomes in the fulfilled expectations equilibrium. We demonstrate that an increase in the proportion of consumers committing to an ex ante expectation for network size, reduces output, consumer surplus, and profit in equilibrium. We also examine the case of myopic expectations.

Keywords: commitment; consumer expectations; network externality; monopoly (search for similar items in EconPapers)
JEL-codes: L1 D4 (search for similar items in EconPapers)
Date: 2017-03-20
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