Local Network Externalities and Market Segmentation

A. Banerji and Bhaskar Dutta

No 269619, Economic Research Papers from University of Warwick - Department of Economics

Abstract: This paper models interaction between groups of agents by means of a graph where each node represents a group of agents and an arc represents bilateral interaction. It departs from the standard Katz-Shapiro framework by assuming that network benefits are restricted only amongst groups of linked agents. It shows that even if rival firms engage in Bertrand competition, this form of network externalities permits strong market segmentation in which firms divide up the market and earn positive profits. The analysis also shows that some graphs or network structures do not permit such segmentation, while for others, there are easy to interpret conditions under which market segmentation obtains in equilibrium.

Keywords: Demand and Price Analysis; Industrial Organization; Marketing (search for similar items in EconPapers)
Pages: 29
Date: 2005-04-04
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Local network externalities and market segmentation (2009)
Working Paper: Local network externalities and market segmentation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269619

DOI: 10.22004/ag.econ.269619

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