Entry Invitations in a Market with Network Effects

Namhoon Kwon

International Economic Journal, 2007, vol. 21, issue 1, 49-59

Abstract: This paper reinvestigates the well-known claim by Economides (1996) that the network effects can lead a monopolist to give away its technology for free. This so-called 'open' strategy is likely to be adopted when marginal network effects are strong but not too strong relative to marginal price effects. Highly elastic demand and highly convex costs also increase the likelihood of such a strategy. I first study the case in which the post-entry market structure is of the Cournot type and later compare the results with the Stackelberg case.

Keywords: Network effects; open strategy; Cournot; Stackelberg (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1080/10168730601180879

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