Price and quality decisions under network effects

Noemí Navarro

Journal of Mathematical Economics, 2012, vol. 48, issue 5, 263-270

Abstract: I analyse monopoly pricing and quality decisions under network effects. High quality premium and low quality punishment are found to depend on how the impact of marginal costs on quality relates to the intensity of the network effect and the optimism of the producer about final demand. More precisely, marginal costs have to be low enough (but not too low) with respect to the intensity of the network effects and/or the optimism about final demand so that higher prices reflect higher quality. A similar conclusion can be drawn about incentives for quality provision, whenever quality is considered endogenous together with price.

Keywords: Network effects; Optimal pricing; Quality provision (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:48:y:2012:i:5:p:263-270

DOI: 10.1016/j.jmateco.2012.06.002

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