On the excess entry theorem in the presence of network effect-sensitive consumers

Tsuyoshi Toshimitsu

No 210, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We reconsider the gexcess entry theorem h in the case of a network product market. Heterogeneous consumers, who are sensitive to network effects, have passive expectations and Cournot oligopolistic competition prevails in the market. We demonstrate that if the network effect elasticity of network size in the equilibrium is sufficiently large, the number of firms under free entry is socially insufficient, compared with the second-best criteria. Otherwise, the socially excessive entry arises. Furthermore, we examine the case of responsive expectations and of network effect-insensitive consumers.

Keywords: excess entry theorem; network effect-sensitive consumers; a fulfilled expectation; Cournot oligopoly (search for similar items in EconPapers)
JEL-codes: D42 L12 L15 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2020-04
New Economics Papers: this item is included in nep-com, nep-gen, nep-net and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:210

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