IDEAS home Printed from https://ideas.repec.org/a/eko/ekoeko/35_45.html
   My bibliography  Save this article

Enforced compatibility and control of switching costs in markets with network externalities: an experiment

Author

Listed:
  • Tomasz Kopczewski
  • Michał Krawczyk
  • Przemysław Kusztelak

Abstract

We experimentally investigate two competition policy measures relevant for markets with network externalities: mandating technological compatibility and lowering the cost of switching between providers. We do so in a virtual market with the roles of both sellers and buyers being played by student subjects. We find only limited support for usefulness of the analyzed measures: our treatment manipulations have no effect on sellers’ pricing strategies. They do, however, reduce individual lock-in, helping the buyers to obtain the currently cheaper variant and thus increase customers’ welfare.

Suggested Citation

  • Tomasz Kopczewski & Michał Krawczyk & Przemysław Kusztelak, 2013. "Enforced compatibility and control of switching costs in markets with network externalities: an experiment," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 35.
    • Handle: RePEc:eko:ekoeko:35_45
    as

    Download full text from publisher

    File URL: http://ekonomia.wne.uw.edu.pl/ekonomia/getFile/377
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Drehmann, Mathias & Oechssler, Jorg & Roider, Andreas, 2007. "Herding with and without payoff externalities -- an internet experiment," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 391-415, April.
    2. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    3. Amir Etziony & Avi Weiss, 2002. "Coordination and Critical Mass in a Network Market - An Experimental Evaluation," Working Papers 2002-05, Bar-Ilan University, Department of Economics.
    4. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    5. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    6. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    7. Economides, Nicholas & White, Lawrence J., 1994. "Networks and compatibility: Implications for antitrust," European Economic Review, Elsevier, vol. 38(3-4), pages 651-662, April.
    8. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    9. Oz Shy, 1996. "Industrial Organization: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691795, December.
    10. Sujoy Chakravarty, 2003. "Experimental Evidence on Product Adoption in the Presence of Network Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 233-254, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matutes, Carmen & Regibeau, Pierre, 1996. "A selective review of the economics of standardization. Entry deterrence, technological progress and international competition," European Journal of Political Economy, Elsevier, vol. 12(2), pages 183-209, September.
    2. Sujoy Chakravarty, 2003. "Experimental Evidence on Product Adoption in the Presence of Network Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 233-254, December.
    3. Oz Shy, 2011. "A Short Survey of Network Economics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 119-149, March.
    4. Laura Baraldi, 2004. "Esternalita' Di Rete: Una Rassegna," Working Papers 12_2004, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    5. Cecere, Grazia & Corrocher, Nicoletta & Battaglia, Riccardo David, 2015. "Innovation and competition in the smartphone industry: Is there a dominant design?," Telecommunications Policy, Elsevier, vol. 39(3), pages 162-175.
    6. den Hartigh, E. & Langerak, F. & Commandeur, H.R., 2002. "The Effects of Self-Reinforcing Mechanisms on Firm Performance," ERIM Report Series Research in Management ERS-2002-46-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. De Bijl, Paul W. J. & Goyal, Sanjeev, 1995. "Technological change in markets with network externalities," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 307-325, September.
    8. Mak, Vincent & Zwick, Rami, 2010. "Investment decisions and coordination problems in a market with network externalities: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 759-773, December.
    9. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    10. Hasan, Iftekhar & Schmiedel, Heiko, 2003. "Do networks in the stock exchange industry pay off? European evidence," Bank of Finland Research Discussion Papers 2/2003, Bank of Finland.
    11. Tatsuhiro SHICHIJO & Yuji NAKAYAMA, 2004. "A Way To Sell Goods With Network Externalities," Econometric Society 2004 Far Eastern Meetings 711, Econometric Society.
    12. Hasan, Iftekhar & Schmiedel, Heiko, 2003. "Do networks in the stock exchange industry pay off? : European evidence," Research Discussion Papers 2/2003, Bank of Finland.
    13. Nicolas Curien & Kenza Oubejja, 1999. "Réseaux multiservices : équilibres et dynamique," Annals of Economics and Statistics, GENES, issue 53, pages 213-228.
    14. Luca Lambertini & Raimondello Orsini, 2005. "The Existence Of Equilibrium In A Differentiated Duopoly With Network Externalities," The Japanese Economic Review, Japanese Economic Association, vol. 56(1), pages 55-66, March.
    15. Sheng-Wuu Joe & Shin-Yi Lin & Chou-Kang Chiu, 2010. "Modeling the unethical intention of software piracy: a qualitative integration of network externalities and information cascades," Quality & Quantity: International Journal of Methodology, Springer, vol. 44(1), pages 191-198, January.
    16. Guimaraes, Bernardo & Pereira, Ana Elisa, 2017. "Dynamic coordination among heterogeneous agents," Journal of Mathematical Economics, Elsevier, vol. 73(C), pages 13-33.
    17. Nicolaas J. Vriend, 2002. "Was Hayek an Ace?," Southern Economic Journal, John Wiley & Sons, vol. 68(4), pages 811-840, April.
    18. Nicolaas J. Vriend, 2002. "Was Hayek an Ace?," Southern Economic Journal, John Wiley & Sons, vol. 68(4), pages 811-840, April.
    19. Grazia Cecere & Nicoletta Corrocher & Cédric Gossart & Muge Ozman, 2014. "Lock-in and path dependence: an evolutionary approach to eco-innovations," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 1037-1065, November.
    20. Liang Chen & Noman Shaheer & Jingtao Yi & Sali Li, 2019. "The international penetration of ibusiness firms: Network effects, liabilities of outsidership and country clout," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(2), pages 172-192, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eko:ekoeko:35_45. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/fesuwpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.