Non-monotonic network effects and market entry

Alexander Lundberg

Economics Letters, 2015, vol. 137, issue C, 146-149

Abstract: The simple circular model of horizontal product differentiation, in which firms compete in price, is characterized by excessive firm entry in equilibrium. When non-monotonic network effects are present, this result no longer holds. If consumers differ in their optimal number of other consumers choosing their same good, entry in equilibrium can be insufficient.

Keywords: Network effects; Free entry; Fixed costs; Product differentiation; Non-monotonicity (search for similar items in EconPapers)
JEL-codes: L1 L2 L5 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:137:y:2015:i:c:p:146-149

DOI: 10.1016/j.econlet.2015.10.039

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