A note on how to sell a network good

André Veiga

International Journal of Industrial Organization, 2018, vol. 59, issue C, 114-126

Abstract: I consider a monopolist in an industry with positive network externalities. The firm can screen heterogeneous consumers by offering multiple products. Screening captures a greater share of consumer surplus but also segregates consumers into multiple products, thereby lowering the total network surplus. Thus, screening is socially inefficient. I show screening is never profit maximizing: the monopolist offers a single product, but at an excessive price. Thus, excessive consumer segregation is unlikely to occur in industries such as online multiplayer games, financial exchanges and messaging software.

Keywords: Network externalities; Peer effects; Mechanism design; Group design; Screening (search for similar items in EconPapers)
JEL-codes: D82 D85 D86 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:59:y:2018:i:c:p:114-126

DOI: 10.1016/j.ijindorg.2017.12.009

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