Network Markets and Consumer Coordination

50 Pages Posted: 13 Nov 2004

See all articles by Attila Ambrus

Attila Ambrus

Duke University - Department of Economics

Rosa Argenziano

affiliation not provided to SSRN

Date Written: October 2004

Abstract

This paper analyzes pricing decisions and competition in network markets, assuming that groups of consumers can coordinate their choices when it is in their interest, if coordination does not require communication. It is shown that multiple asymmetric networks can coexist in equilibrium. A monopolist might operate multiple ex ante identical networks to price differentiate. In Bertrand competition different firms might target high reservation value consumers on different sides of the market. Firms can obtain positive profits in price competition. Product differentiation in equilibrium is endogenized by consumers' network choices. Enough heterogeneity in reservation values is necessary for existence of these asymmetric equilibria.

Keywords: two-sided markets, network externalities, platform competition, coordination

JEL Classification: D43, D62, L11, L14

Suggested Citation

Ambrus, Attila and Argenziano, Rosa, Network Markets and Consumer Coordination (October 2004). Available at SSRN: https://ssrn.com/abstract=619042

Attila Ambrus (Contact Author)

Duke University - Department of Economics ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Rosa Argenziano

affiliation not provided to SSRN

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