Based on the critical assumption of strategic complementarity, this paper builds a general model to describe and solve the screening problem faced by the monopolist seller of a network good. By applying monotone comparative static tools, we demonstrate that the joint presence of asymmetric information and positive network effects leads to a strict downward distortion for all consumers in the quantities provided. We also show that the equilibrium allocation is an increasing function of the intensity of network effects, and that a discriminating monopoly may supply large quantities for all consumers than a competitive industry.
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Paper provided by Institute of Economics, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number
0414.
Find related papers by JEL classification: D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly D62 - Microeconomics - - Welfare Economics - - - Externalities D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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