Stubbornness is unprofitable: On the role of consumer expectations in a monopoly network goods market

Tsuyoshi Toshimitsu

No 152, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We consider the formation (or timing) of consumer expectations regarding network size. Using a simple monopoly model with network externalities, we examine how the formation of consumer expectations, i.e., either stubborn or flexible expectations, affects the fulfilled expected monopoly equilibrium. We demonstrate that an increase in stubbornness reduces both output and consumer surplus. Furthermore, it is unprofitable for the monopolist that consumers have stubborn expectations.

Keywords: stubbornness; consumer expectations; network externality; monopoly (search for similar items in EconPapers)
JEL-codes: L12 L15 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2016-12, Revised 2016-12
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:152

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