Negative network effects and asymmetric pure price equilibria

Renato Soeiro () and Alberto A. Pinto
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Renato Soeiro: University of Porto and Inesc Tec
Alberto A. Pinto: University of Porto and Inesc Tec

Portuguese Economic Journal, 2023, vol. 22, issue 1, No 6, 99-124

Abstract: Abstract We show that in finite settings with identical firms and consumers, asymmetric pure price equilibria with positive profits exist. We consider a price competition duopoly for a homogeneous product. Demand stems from a second-stage consumption game at posted prices, with consumers’ behavior impacted by negative network effects. We characterize equilibrium prices and demand. In all subgame-perfect pure price equilibria, both firms have positive profits, and in some, firms charge different prices.

Keywords: Bertrand duopoly; Pure price equilibrium; Homogeneous goods; Price dispersion; Network effects (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10258-021-00199-3

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