Network effects without network externalities
暂无分享,去创建一个
Abstract The network externalities hypothesis postulates that consumers prefer to purchase brands which are bought by more consumers compared with brands with a low market share. In this paper, we show that increasing returns to scale in the production of complementary products can substitute for the network externalities assumption. We develop a model for the computer industry in which the production of complementary software requires a large fixed cost of development relative to the cost of duplicating and marketing the software. The increasing returns to scale in the production of software yields consumers' behavior which is very similar to consumers who have preferences exhibiting network externalities.
[1] P. Klemperer. The Competitiveness of Markets with Switching Costs , 1987 .
[2] Joseph Farrell,et al. Standardization, Compatibility, and Innovation , 1985 .
[3] C. Shapiro,et al. Network Externalities, Competition, and Compatibility , 1985 .
[4] A. Dixit,et al. Monopolistic competition and optimum product diversity , 1977 .