IDEAS home Printed from https://ideas.repec.org/p/ags/uwarer/270241.html
   My bibliography  Save this paper

Compatibility, Intellectual Property, Innovation and Welfare in Durable Goods Markets with Network E§ects

Author

Listed:
  • Athanasopoulos, Thanos

Abstract

This article investigates dominant Örmsí approach towards the compatibility of their durable network goods with that of a future, innovative rival in the presence of overlapping generations of forward-looking consumers and the welfare e§ects from dominant Örmsí refusals to support compatibility. I consider sequential, substitutable product innovations, where a rival can build on a dominant Örmís existing knowledge. For moderately innovative future products, the market leader supports compatibility because strategic pricing allows him to extract more of the higher total surplus that emerges when compatibility is present. Incompatible networks increase consumer surplus and there is no market failure when network e§ects are weak.

Suggested Citation

  • Athanasopoulos, Thanos, 2015. "Compatibility, Intellectual Property, Innovation and Welfare in Durable Goods Markets with Network E§ects," Economic Research Papers 270241, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:270241
    DOI: 10.22004/ag.econ.270241
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/270241/files/twerp_1043b_athanasopoulos.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/270241/files/twerp_1043b_athanasopoulos.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.270241?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jacques Crémer & Patrick Rey & Jean Tirole, 2000. "Connectivity in the Commercial Internet," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 433-472, December.
    2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    3. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    4. Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2009. "Avoiding market dominance: product compatibility in markets with network effects," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 455-485, September.
    5. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
    6. Nicholas Economides, 2006. "Public Policy in Network Industries," Working Papers 06-17, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Cabral, Luís & Salant, David, 2014. "Evolving technologies and standards regulation," International Journal of Industrial Organization, Elsevier, vol. 36(C), pages 48-56.
    8. Jeffrey Church & Neil Gandal, 2000. "Systems Competition, Vertical Merger, and Foreclosure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(1), pages 25-51, March.
    9. Doganoglu, Toker & Wright, Julian, 2006. "Multihoming and compatibility," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 45-67, January.
    10. David A. Malueg & Marius Schwartz, 2006. "Compatibility Incentives Of A Large Network Facing Multiple Rivals," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 527-567, December.
    11. Glenn Ellison & Drew Fudenberg, 2000. "The Neo-Luddite's Lament: Excessive Upgrades in the Software Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 253-272, Summer.
    12. María Fernanda Viecens, 2009. "Compatibility with Firm Dominance," Working Papers 2009-12, FEDEA.
    13. Luis Cabral & Ben Polak, 2007. "Dominant Firms, Imitation, and Incentives to Innovate," Working Papers 07-5, New York University, Leonard N. Stern School of Business, Department of Economics.
    14. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    15. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
    16. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 27-46, February.
    17. repec:bla:jindec:v:48:y:2000:i:4:p:433-72 is not listed on IDEAS
    18. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
    19. Economides, Nicholas & White, Lawrence J., 1994. "Networks and compatibility: Implications for antitrust," European Economic Review, Elsevier, vol. 38(3-4), pages 651-662, April.
    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. Athanasopoulos, Thanos, 2014. "Compatibility, Intellectual Property,Innovation and Welfare in Durable Goods Markets with Network Effects," The Warwick Economics Research Paper Series (TWERPS) 1043, University of Warwick, Department of Economics.
    2. María Fernanda Viecens, 2009. "Compatibility with Firm Dominance," Working Papers 2009-12, FEDEA.
    3. Maruyama Masayoshi & Zennyo Yusuke, 2013. "Compatibility and the Product Life Cycle in Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 12(2), pages 131-155, June.
    4. Athanasopoulos, Thanos, 2015. "Incentives to Innovate, Compatibility and Welfare in Durable Goods Markets with Network Effects," Economic Research Papers 270229, University of Warwick - Department of Economics.
    5. Feng Zhu, 2008. "Ad-sponsored Business Models and Compatibility Incentives of Social Networks," Working Papers 08-20, NET Institute, revised Sep 2008.
    6. Norbäck, Pehr-Johan & Persson, Lars & Tå̊g, Joacim, 2014. "Acquisitions, entry, and innovation in oligopolistic network industries," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 1-12.
    7. Viecens María Fernanda, 2011. "Compatibility with Firm Dominance," Review of Network Economics, De Gruyter, vol. 10(4), pages 1-27, December.
    8. 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.
    9. P. Dogan, "undated". "Vertical Networks, Integration, and Connectivity," Working Paper 33644, Harvard University OpenScholar.
    10. Ron Adner & Jianqing Chen & Feng Zhu, 2020. "Frenemies in Platform Markets: Heterogeneous Profit Foci as Drivers of Compatibility Decisions," Management Science, INFORMS, vol. 66(6), pages 2432-2451, June.
    11. Bianchi, Milo & Bouvard, Matthieu & Gomes, Renato & Rhodes, Andrew & Shreeti, Vatsala, 2023. "Mobile payments and interoperability: Insights from the academic literature," Information Economics and Policy, Elsevier, vol. 65(C).
    12. Persson, Lars & Norbäck, Pehr-Johan & Tåg, Joacim, 2013. "Acquisitions, Entry, and Innovation in Network Industries," CEPR Discussion Papers 9585, C.E.P.R. Discussion Papers.
    13. Luís Cabral, 2011. "Dynamic Price Competition with Network Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 83-111.
    14. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    15. Carter, Kenneth R. & Marcus, J. Scott & Wernick, Christian, 2008. "Network neutrality: Implications for Europe," WIK Discussion Papers 314, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    16. Athanasopoulos, Thanos, 2014. "Incentives to Innovate, Compatibility and Efficiency in Durable Goods Markets with Network Effects," The Warwick Economics Research Paper Series (TWERPS) 1054, University of Warwick, Department of Economics.
    17. Jahn, Eric & Prüfer, Jens, 2008. "Interconnection and competition among asymmetric networks in the Internet backbone market," Information Economics and Policy, Elsevier, vol. 20(3), pages 243-256, September.
    18. Hahn, Jong-Hee, 2003. "Nonlinear pricing of telecommunications with call and network externalities," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 949-967, September.
    19. Jahn, E. & Prüfer, J., 2006. "Interconnection and Competition Among Asymmetric Networks in the Internet Backbone Market," Other publications TiSEM bd881fcf-2f45-48ed-bac7-c, Tilburg University, School of Economics and Management.
    20. Jiawei Chen & Ulrich Doraszelski & Joseph E. Harrington, Jr., 2009. "Avoiding market dominance: product compatibility in markets with network effects," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 455-485, September.

    More about this item

    Keywords

    Financial Economics;

    Statistics

    Access and download statistics

    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:ags:uwarer:270241. 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: AgEcon Search (email available below). General contact details of provider: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/ .

    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.