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Jeffrey Rohlfs' 1974 Model of Facebook: An Introduction

13 Pages Posted: 4 Apr 2011  

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: March 31, 2011

Abstract

This short essay, forthcoming in Competition Policy International, summarizes and evaluates Jeffrey Rohlfs' 1974 Bell Journal paper, "A Theory of Interdependent Demand for a Telecommunications Service." Rohlfs' work helped create a large literature on markets with network externalities in which demand decisions have long-lasting consequences, a literature that has informed competition policy. But Rohlfs assumed that demand-side decisions did NOT have long-lasting consequences. Social networking and internet-based markets of this sort are increasingly important but have not been extensively studied. While they may post interesting antitrust challenges, they are almost certainly not the challenges to which the post-Rohlfs literature pointed.

Keywords: network, externality, antitrust, Facebook

JEL Classification: L10, L40

Suggested Citation

Schmalensee, Richard, Jeffrey Rohlfs' 1974 Model of Facebook: An Introduction (March 31, 2011). MIT Sloan Research Paper No. 4893-11. Available at SSRN: https://ssrn.com/abstract=1802053 or http://dx.doi.org/10.2139/ssrn.1802053

Richard Schmalensee (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Room E62-525
Cambridge, MA 02142
United States
617-253-2957 (Phone)
617-258-6617 (Fax)

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