On the incentive to attract competition with network effects

Gyu Ho Wang and Chongmin Kim

No 572, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: In this paper, we study the incumbent's incentive to share its essential facility when there exist network effects. We show that without network effects, the incumbent will charge an access fee high enough to deter the entry. with network effects, however, the incumbent always has an incentive to invite entry. We also show that if the potential entrant has to pay the entry cost, the incumbent has an incentive to subsidize the entrant with a low access fee

Keywords: Network effects; Foreclosure; Essential facility; Access charge (search for similar items in EconPapers)
JEL-codes: D4 L1 L5 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:572

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