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A Two-Step Subsidy Scheme to Overcome Network Externalities in a Dynamic Game

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  • Shichijo Tatsuhiro

    (Osaka Prefecture University, shichijo@eco.osakafu-u.ac.jp)

  • Nakayama Yuji

    (Osaka Prefecture University, nakayama@eco.osakafu-u.ac.jp)

Abstract

Many goods have network externalities. When the number of agents possessing such goods is small, the agents may not gain sufficient utility from the goods. Agents then have an incentive to delay their purchasing decisions. Such delays have negative effects on the agents' utility, so equilibrium with delays is inefficient. We propose a method of resolving this problem using a two-step scheme with participation fees and subsidies. If this method is used, and certain conditions are satisfied, all agents purchase the good and the delay in equilibrium decreases.

Suggested Citation

  • Shichijo Tatsuhiro & Nakayama Yuji, 2009. "A Two-Step Subsidy Scheme to Overcome Network Externalities in a Dynamic Game," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-20, February.
    • Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:4
    DOI: 10.2202/1935-1704.1496
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    References listed on IDEAS

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    Cited by:

    1. Daiki Kishishita, 2018. "When trade liberalization is self†fulfilling: Population aging and uncertainty," Economics and Politics, Wiley Blackwell, vol. 30(2), pages 274-306, July.
    2. Masaki Aoyagi, 2010. "Monopoly Sale of a Network Good," ISER Discussion Paper 0794, Institute of Social and Economic Research, Osaka University.
    3. Tatsuhiro Shichijo & Emiko Fukuda, 2019. "A dynamic game analysis of Internet services with network externalities," Theory and Decision, Springer, vol. 86(3), pages 361-388, May.
    4. Aoyagi, Masaki, 2013. "Coordinating adoption decisions under externalities and incomplete information," Games and Economic Behavior, Elsevier, vol. 77(1), pages 77-89.

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