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Network dynamics: competition and welfare

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  • Hayashi, Toshihiko

Abstract

Making use of a simple quadratic model of network externalities, the author studies the nature and bionomics of dynamic network competition. The author establishes that whether or not the network grows into the socially preferable equilibrium depends on the initial condition, dynamic competition between homogeneous networks selects the single survivor that may or may not be the fittest, and if there is product differentiation there is a possibility that two networks coexist in equilibrium better serving the society by doing so.

Suggested Citation

  • Hayashi, Toshihiko, 1995. "Network dynamics: competition and welfare," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 39(3), pages 399-402.
    • Handle: RePEc:eee:matcom:v:39:y:1995:i:3:p:399-402
    DOI: 10.1016/0378-4754(94)00090-X
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    References listed on IDEAS

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    1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    2. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
    3. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
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    Cited by:

    1. Willner, Johan, 2006. "Privatisation and liberalisation in an industry with network externalities," Economics Letters, Elsevier, vol. 91(2), pages 197-203, May.

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