The welfare effect of quality degradation in the presence of network externalities
نویسنده
چکیده
This paper examines how the presence of network externalities affects a monopolist’s incentive for quality degradation and its welfare consequence. The software and the Internet service industries provide our primary motivation. The network externality may lead to a Pareto-improving quality degradation that would not be realised in the absence of network externalities. However, it may also overturn a potentially Paretoimproving quality degradation to a welfare-reducing one, or result in the realisation of a welfare-reducing quality degradation that would be avoided without network externalities. We also endogenise the firm’s forward and backward compatibility decisions between the original good and the degraded good.
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ورودعنوان ژورنال:
- Information Economics and Policy
دوره 16 شماره
صفحات -
تاریخ انتشار 2004