Adaptive Expectations and Dynamic Models for Network Goods

Arnut Paothong () and G.S. Ladde
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Arnut Paothong: Department of Mathematics and Statistics, University of South Florida, 4202 East Fowler Avenue, PHY 114, Tampa Florida, 33620-5700 USA
G.S. Ladde: Department of Mathematics and Statistics, University of South Florida, 4202 East Fowler Avenue, PHY 114, Tampa Florida, 33620-5700 USA

Economic Analysis and Policy, 2013, vol. 43, issue 3, 353-373

Abstract: In this work, we consider a utility function that is influenced by the value of network externality function at the consumer’s expected market size/share. Using this utility function, a market share adjustment function is introduced and is utilized to develop dynamic models of existing rational and static expectation processes. In addition, the role and scope of dynamic models of market share adjustment process are extended to the well-known adaptive expectation and its extension processes. The properties of equilibrium states of dynamic models are investigated which include location, stability, oscillation and the initial states in systematic and unified way. The most significant byproduct of presented results is that the properties of equilibrium states depend on the type of consumer expectation of a network good and the parameters of dynamic market share adjustment processes.

Keywords: Network externality; Adaptive expectation; Fixed point theorem; Stability (search for similar items in EconPapers)
JEL-codes: D01 D11 D8 D84 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:43:y:2013:i:3:p:353-373

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