Abstract

http://ssrn.com/abstract=2335716
 


 



Dynamic Network Competition


Hanna Halaburda


Bank of Canada

Bruno Jullien


University of Toulouse 1 - Toulouse School of Economics (TSE); University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Yaron Yehezkel


Tel Aviv University - Eitan Berglas School of Economics

September 30, 2013

NET Institute Working Paper No. 13-10

Abstract:     
This paper considers a dynamic platform competition in a market with network externalities. We ask two research questions. The first one asks how the beliefs advantage carries over in time, and whether a low-quality platform can maintain its focal position along time. We show that for very high and very low discount factors it is possible for the low-quality platform to maintain its focal position indefinitely. But for the intermediate discount factor the higher quality platform wins and keeps the market. The second question asks what drives changes in the market leadership along time (observed in many markets, like smartphones and video-game consoles), and how such changes can be supported as a dynamic equilibrium outcome. We offer two explanations. The first explanation relies on intrinsic equilibrium uncertainty. The second explanation relies on the adoption of technology. One could expect such change in the market leader to be a sign of intense competition between platforms. However, we find that changes in leadership indicate softer price competition.

Number of Pages in PDF File: 23

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Date posted: October 7, 2013  

Suggested Citation

Halaburda, Hanna and Jullien, Bruno and Yehezkel, Yaron, Dynamic Network Competition (September 30, 2013). NET Institute Working Paper No. 13-10. Available at SSRN: http://ssrn.com/abstract=2335716 or http://dx.doi.org/10.2139/ssrn.2335716

Contact Information

Hanna Halaburda (Contact Author)
Bank of Canada ( email )
234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada
Bruno Jullien
University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )
Place Anatole-France
Toulouse Cedex, F-31042
France
University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )
Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France
+33 5 6112 8561 (Phone)
+33 5 6122 8637 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Yaron Yehezkel
Tel Aviv University - Eitan Berglas School of Economics ( email )
P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9908 (Fax)
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