13 Pages Posted: 4 Apr 2011
Date Written: March 31, 2011
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: 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