Market structure in congestible markets


Lee, In Ho and Mason, Robin (2001) Market structure in congestible markets. European Economic Review, 45, (4-6), 809-818. (doi:10.1016/S0014-2921(01)00130-1).

Download

Full text not available from this repository.

Description/Abstract

This paper analyses market structure of industries that are subject to both positive and negative network effects. The size of a firm determines the quality of its product: when network effects are positive, a larger firm is of higher quality; when the effects are negative, a larger firm's product is of lower quality. Consumers have heterogeneous preferences towards quality (firm size), and firms compete in prices. Equilibria are characterised: for example, in any asymmetric equilibrium, it must be that congestion is not too severe. One consequence of this feature is that an increase in the number of firms in the industry can raise individual firms’ profits. Two factors can bound the number of firms in a free-entry equilibrium without fixed costs: expectations, and the ‘finiteness’ property (Shaked and Sutton, Review of Economic Studies 49 (1982) 3–13, Econometrica 51(5) (1983) 1469–1483) of price competition.

Item Type: Article
ISSNs: 0014-2921 (print)
Related URLs:
Keywords: congestion, networks, market structure
Subjects: H Social Sciences > HB Economic Theory
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 32982
Date Deposited: 15 May 2006
Last Modified: 27 Mar 2014 18:20
URI: http://eprints.soton.ac.uk/id/eprint/32982

Actions (login required)

View Item View Item