Product Compatibility in Network Industries with Switching Costs
نویسندگان
چکیده
منابع مشابه
Product Compatibility in Network Industries with Switching Costs
This paper investigates how switching costs affect product compatibility and market dynamics in network industries. A reduction in the switching cost makes the firms’ products more attractive relative to the outside good, which diminishes the market expansion benefit of making products compatible. As a result, the larger firm is more likely to veto compatibility in order to maintain its install...
متن کاملSwitching Costs and Network Compatibility
This paper investigates how consumer switching costs affect firms’ compatibility choices and social welfare in network industries. Firms face a choice between two modes of competition: make their networks incompatible and compete fiercely for market dominance, or make their networks compatible and have mild competition. By incentivizing firms to harvest their locked-in consumers rather than pri...
متن کاملReimbursing Consumers’ Switching Costs in Network Industries
This paper investigates firms’ decisions to reimburse consumers’ switching costs in network industries. Prior literature finds that switching costs incentivize firms to harvest their locked-in consumers rather than price aggressively for market dominance, thereby resulting in a lower market concentration. Using a dynamic duopoly model, we show that this result is reversed if firms have the opti...
متن کاملHow do Switching Costs A¤ect Market Concentration and Prices in Network Industries?
I investigate the e¤ects of switching costs on the market outcome in network industries using a dynamic duopoly model of price competition in the presence of an outside option. I nd that the role of switching costs depends on network e¤ects and the outside option. Without a viable outside option, high switching costs can neutralize the tendency towards high market concentration associated with...
متن کاملHow do Switching Costs Affect Market Concentration and Prices in Network Industries?
Switching costs are prevalent in network industries, and this paper investigates their effects on market outcome. I find that the role of switching costs depends on network effects and the outside option. Without a viable outside option, high switching costs can neutralize the tendency towards market dominance associated with network effects, but with a viable outside option, switching costs fa...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2010
ISSN: 1556-5068
DOI: 10.2139/ssrn.1694315