A start-up problem in a pure network good market and the role of a stand-alone effect with a monopoly: A revisit of Rohlfs (1974, 2001)

Tsuyoshi Toshimitsu

Economics Bulletin, 2023, vol. 43, issue 3, 1434 - 1443

Abstract: We consider the start-up problem in the case of a monopoly providing a pure network good, such as in telecommunications and Internet businesses. This is a fundamental problem previously examined by Rohlfs (1974) and an issue closely related to coordination failure. As addressed in Lambertini and Orsini (2004), the coordination problem is not associated with network effects and depends on consumer expectations. We demonstrate the perspectives of Rohlfs (1974, 2001), finding the start-up problem is associated with critical mass under passive expectations and the stand-alone effect can be used to solve the problem.

Keywords: pure network good; network effect; stand-alone value; critical mass; start-up problem; coordination failure; passive expectations; monopoly (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2023-09-30
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