Network Externality and the Coordination Problem: A Generalization of Rohlfs's Model

Luca Lambertini (luca.lambertini@unibo.it) and Raimondello Orsini (raimondello.orsini@unibo.it)

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We show that Rholfs's (1974) model is a special case of a spatial monopoly model la Hotelling (1929) with quadratic transportation costs, where location is exogenous and the good yealds no intrinsic utility. By relaxing these assumptions, we prove that the coordination problem typically thought to affect markets for network goods may not arise in general. Endogenizing location makes it easier for the monopolist to extract consumer surplus but also to cover the entire market.

Date: 2003
New Economics Papers: this item is included in nep-mic and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:471

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