Network externalities and the Coase conjecture
Network externalities and the Coase conjecture
This paper addresses two general questions. First, what is the effect of market structure on the development of a network in a dynamic model with rational expectations? Secondly, is the intuition that network externalities are ‘economies of scale on the demand side’ correct? These questions are examined in a model of durable good production in the presence of network externalities. Two results are presented. First, the Coase conjecture fails in its strongest sense when network benefits are increasing in the current network size. Secondly, a committed monopolist may be socially preferable to a time consistent producer when network externalities are sufficiently large. The analysis indicates an analogy between network externalities and learning-by-doing
coase conjecture, network externalities
1981-1992
Mason, Robin
c989f0e0-de54-495d-aeaf-75b42d62cb61
2000
Mason, Robin
c989f0e0-de54-495d-aeaf-75b42d62cb61
Abstract
This paper addresses two general questions. First, what is the effect of market structure on the development of a network in a dynamic model with rational expectations? Secondly, is the intuition that network externalities are ‘economies of scale on the demand side’ correct? These questions are examined in a model of durable good production in the presence of network externalities. Two results are presented. First, the Coase conjecture fails in its strongest sense when network benefits are increasing in the current network size. Secondly, a committed monopolist may be socially preferable to a time consistent producer when network externalities are sufficiently large. The analysis indicates an analogy between network externalities and learning-by-doing
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Published date: 2000
Additional Information:
JEL classification codes: C73, C78, D42, L12
Keywords:
coase conjecture, network externalities
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Local EPrints ID: 33003
URI: http://eprints.soton.ac.uk/id/eprint/33003
ISSN: 0014-2921
PURE UUID: 50bc36f7-4591-4775-bae8-5025480a151d
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Date deposited: 18 Jul 2006
Last modified: 15 Mar 2024 07:40
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Author:
Robin Mason
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