Open AccessQuality Improvement and Network Externalities
Author(s) -
Jean J. Gabszewicz,
Filomena Garcia
Publication year - 2006
Publication title -
ssrn electronic journal
Language(s) - English
Resource type - Journals
ISSN - 1556-5068
DOI - 10.2139/ssrn.886294
Subject(s) - quality (philosophy) , externality , economics , business , environmental economics , computer science , microeconomics , physics , quantum mechanics
We analyse the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which quality improvement occurs as a result of this competition.
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