Price and quality decisions under network effects

Noemí Navarro

Cahiers de recherche from Departement d'économique de l'École de gestion à l'Université de Sherbrooke

Abstract: I analyze monopoly pricing and quality decisions under network effects. High quality premium and low quality punishment are found to depend on how the impact of marginal costs on quality relates to the intensity of the network effect and the optimism of the producer about final demand. More precisely, marginal costs have to be low enough (but not too low) with respect to the intensity of the network effects and/or the optimism about final demand so that higher prices reflect higher quality. A similar conclusion can be drawn about incentives for quality provision, whenever quality is considered endogenous together with price.

Keywords: Network effects; optimal pricing; quality provision (search for similar items in EconPapers)
JEL-codes: C7 D42 D82 D83 L12 L14 L15 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2012-02
New Economics Papers: this item is included in nep-com, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Price and quality decisions under network effects (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:shr:wpaper:12-01

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