Screening Contracts in the Presence of Positive Network Effects

Gergely Csorba ()

No 414, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Based on the critical assumption of strategic complementarity, this paper builds a general model to describe and solve the screening problem faced by the monopolist seller of a network good. By applying monotone comparative static tools, we demonstrate that the joint presence of asymmetric information and positive network effects leads to a strict downward distortion for all consumers in the quantities provided. We also show that the equilibrium allocation is an increasing function of the intensity of network effects, and that a discriminating monopoly may supply large quantities for all consumers than a competitive industry.

Keywords: network effects; strategic complementarities; contracting with externalities; second-degree discrimination; monotone comparative statics (search for similar items in EconPapers)
JEL-codes: D42 D62 D82 L12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-08
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Related works:
Journal Article: Screening contracts in the presence of positive network effects (2008)
Working Paper: Screening Contracts in the Presence of Positive Network Effects (2004)
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