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General Network Effects and Welfare

Author

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  • Pollock, R.

Abstract

(In)direct network effects arise frequently in economic models but, for reasons of analytical tractability, are often assumed to be linear. Here, we examine the general non-linear case with two platforms. We establish the conditions characterising equilibria and show that welfare changes can be related in a simple, intuitive way to the degree of diminishing returns of the network effects function.

Suggested Citation

  • Pollock, R., 2009. "General Network Effects and Welfare," Cambridge Working Papers in Economics 0915, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0915
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    References listed on IDEAS

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    1. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
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    Cited by:

    1. Tim Paul Thomes, 2010. "Vertically Related Markets of Collective Licensing of Differentiated Copyrights with Indirect Network Effects," Jena Economics Research Papers 2010-056, Friedrich-Schiller-University Jena.

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    More about this item

    Keywords

    Network Effects; Indirect Network Effects; Platforms; Welfare;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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    This paper has been announced in the following NEP Reports:

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