14 Pages Posted: 8 Oct 2013
Date Written: July 1, 2013
Platforms like telecommunication networks sell participation into groups, with group quality being determined by group composition. A monopolist may price-discriminate by offering several mutually exclusive groups of different qualities and prices, but such behavior seems absent from platform industries. The reason is that, under positive network externalities, both the welfare and profit maximizing group structures involve a single group, the latter having a higher price.
Keywords: Asymmetric and Private Information, Network Formation and Analysis, Economics of Contracts
JEL Classification: D82, D85, D86
Suggested Citation: Suggested Citation