Cournot Oligopoly with Network Effects

The nature of competition is quite different in network industries as compared to the other, more traditional, ones. The purpose of the present paper is to thoroughly examine the implications of these differences as reflected in the dependence of equilibrium outputs, price and profits on industry concentration. We restrict the analysis to oligopolistic competition amongst firms in a market characterized by positive (direct) network effects when the relevant network is industry-wide. The proofs rely on lattice-theoretic methods; this approach allows us to unify in a common setting the general results in the literature on network goods, weakening considerably the assumptions. As a by-product we offer an alternative explanation of the start-off phenomenon in network industries. JEL codes: C72, D43, L13, L14.