Weekly Economics Webinar by Richard Holden
September 15 @ 1:30 pm - 2:40 pm
- This event has passed.
Title: Network Externalities and Market Dominance [link to paper]
Speaker: Richard Holden, Professor, University of New South Wales
Abstract: We develop a framework to study optimal pricing and price competition in the presence of multiple equilibria caused by network externalities. This framework provides a simple approach to equilibrium selection, based upon consumers’ “impulses,” that yields concise predictions regarding when firms will be “in” and when “out.” We highlight the role of past consumption and “influencers” in shaping impulses, and provide a unified explanation for a variety of stylized facts including why: (i) it is difficult to become “in”; (ii) the “in” position is fragile; (iii) “in” firms are not asleep in the sense that they continuously raise quality and keep prices low; and (iv) “in” firms acquire startups to entrench their position.