Note on the excess entry theorem in the presence of network externalities

Tsuyoshi Toshimitsu

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2020, vol. 47, issue 2, No 4, 282 pages

Abstract: Abstract Focusing on the type of consumer expectations, i.e., passive and responsive expectations, we reconsider the excess entry theorem in the case of Cournot oligopoly with network externalities. We demonstrate that whether the number of firms under free entry is socially excessive or insufficient depends on the type of consumer expectations and the degree of network externalities. That is, in the case of passive expectations, if the degree of network externalities is sufficiently large (small), the number of firms under free entry is socially insufficient (excessive), based on the second-best criteria. However, in the case of responsive expectations, the number of firms under free entry is socially excessive, based on the second-best criteria.

Keywords: Excess entry theorem; Cournot oligopoly; Free entry; Network externality; A fulfilled equilibrium; Passive expectations; Responsive expectations (search for similar items in EconPapers)
JEL-codes: D21 D43 D62 L15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Working Paper: Note on the Excess Entry Theorem in the Presence of Network Externalities (2019)
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DOI: 10.1007/s40812-020-00151-0

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