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Comment on “Price and quantity competition in network goods duopoly: A reversal resultâ€

Tsuyoshi Toshimitsu

Economics Bulletin, 2019, vol. 39, issue 3, 1855-1859

Abstract: Based on the utility function of Hoernig (2012), who introduces network externalities, Pal (2014) considers some of the classic issues related to Cournot and Bertrand equilibria, e.g., Singh and Vives (1984), and demonstrates that profit under Bertrand equilibrium is higher than that under Cournot equilibrium if the degree of network externalities is sufficiently large. In this note, focusing on the role of consumer expectations, i.e., active and passive expectations, of network sizes, we demonstrate that the main result of Pal (2014) does not hold under active expectations. Furthermore, we compare profits, outputs, and consumer surplus in equilibrium in the cases of active and passive expectations.

Keywords: Cournot and Bertrand competition; network externality; horizontally differentiated duopoly; fulfilled expectation; active and passive expectations (search for similar items in EconPapers)
JEL-codes: D2 L1 (search for similar items in EconPapers)
Date: 2019-08-11
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