Compatibility Under Differentiated Duopoly with Network Externalities: A Comment

Tsuyoshi Toshimitsu

Journal of Industry, Competition and Trade, 2014, vol. 14, issue 3, 335 pages

Abstract: Chen and Chen (J Ind Compet Trade 11:43−55, 2011 ) analyze the effects of compatibility under system product Cournot competition with network externalities. They show that a firm’s optimal strategy is to set an incompatible system standard, even though perfect compatibility is socially optimal. In this case, a social dilemma arises. However, their result depends on a specific assumption about the network size. We use the framework of Shy ( 1995 ) to modify this assumption, and hence show that the social dilemma identified by Chen and Chen (J Ind Compet Trade 11:43−55, 2011 ) does not arise. Copyright Springer Science+Business Media New York 2014

Keywords: Network externality; Compatibility; System product; Cournot competition; D21; D43; D62 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10842-013-0170-0

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