Congestible services and network effects

We study a system where many identical users of a service share a common resource. Each user is sensitive to congestion at the resource, but also experiences a positive network effect. We consider a model where both effects depend on the usage of individuals in the system, as well as potentially the number of users in the system. We consider two benchmark scales for the service: the subscriber base most preferred by an individual user (the "user-preferred" club size), and the subscriber base most preferred by the service manager (the "manager-preferred" club size). We find that the user-preferred size is always smaller than that chosen by a service manager; however, somewhat surprisingly, usage in the user-preferred club size is always efficient. Next, we carry out an asymptotic analysis in the regime where the network effect is increased without bound. We find that in this regime, the asymptotic behavior of the user-preferred club can be quite different from that formed by a service manager: for example, the user-preferred club size may remain finite, even if the club formed by a service manager has infinitely many members

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