Monopoly, Quality, and Network Externalities1
نویسندگان
چکیده
We describe the behaviour of a monopolist supplying a vertically di¤erentiated good with network externalities. Assuming a ...xed cost of quality improvements, we show that the presence of network externalities enhances the incentive to expand output associated with scale economies. Although the quality distortion operated by the monopolist increases with network externalities, the output expansion e¤ect is dominant, so that the welfare loss due to monopoly power shrinks as the role of network externalities in determining consumers’ satisfaction becomes more relevant. J.E.L. Classi...cation: D62, L12, L52
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