Premium
Social efficiency of entry: Implications of network externalities
Author(s) -
Basak Debasmita,
Petrakis Emmanuel
Publication year - 2021
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12431
Subject(s) - network effect , externality , welfare , microeconomics , industrial organization , economics , social welfare , barriers to entry , compatibility (geochemistry) , business , market economy , market structure , engineering , political science , law , chemical engineering
We examine the welfare effects of entry in the presence of network externalities. We show that if network goods are fully incompatible, entry is socially insufficient as long as the entry cost is high, the goods are sufficiently differentiated, and the degree of network externality is low. Further, we show that as the degree of compatibility between the network goods increases, insufficient entry becomes more likely. Our findings provide policy guidelines for anticompetitive and procompetitive entry regulations.