Location Decisions of Competing Networks

Serfes, Konstantinos; Zacharias, Eleftherios

doi:10.2139/ssrn.1481336

Cited by 5 publications

(13 citation statements)

References 16 publications

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“…They find an inefficient allocation of consumers and excessive compatibility. In Serfes and Zacharias (2009) characteristics, the products differ with respect to their qualities, we find that, if the network effect is relatively weak, the high-quality firm captures a larger share of the market and the low-quality firm a smaller one, depending on the quality difference. If the network effect is relatively strong, either the low-quality firm or the high-quality firm may capture the entire market; however, for the low-quality firm to capture the entire market, the quality difference cannot be too large relative to the network effect.…”

Section: Introductionmentioning

confidence: 84%

Price competition in a differentiated products duopoly under network effects

Griva

Vettas

2011

Information Economics and Policy

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Section: Introductionmentioning

confidence: 84%

Price competition in a differentiated products duopoly under network effects

Griva

Vettas

2011

Information Economics and Policy

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“…Consumers inelastically demand one unit of the service that is provided by the platforms. We follow Armstrong () in considering linear inter‐group externalities, and restrict our analysis to the case in which there is symmetry between the two sides of the market, making it close to Griva and Vettas () and Serfes and Zacharias ().…”

Section: The Modelmentioning

confidence: 99%

“…However, there are contributions where horizontal and vertical differentiation are simultaneously considered, as Neven and Thisse (), Economides (), Irmen and Thisse (), Daughety and Reinganum (, ), Levin, Peck and Ye () and Gabszewicz and Wauthy (). In the contributions of Mitchell and Skrzypacz (), Argenziano (), Griva and Vettas (), Serfes and Zacharias () and Amir, Gabszewicz and Resende (), besides horizontal and vertical product differentiation, simple network externalities are an additional ingredient.…”

mentioning

confidence: 99%

Nesting Vertical and Horizontal Differentiation in Two‐sided Markets

Ribeiro

Correia‐da‐Silva

Resende

2016

Bulletin of Econ Res

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Abstract. We merge the two-sided markets duopoly model of Armstrong (2006) with the nested vertical and horizontal differentiation model of Gabszewicz and Wauthy (2012), which consists of a linear city with different consumer densities on the left and on the right side of the city. In equilibrium, the high-quality platform sells at a higher price and captures a greater market share than the low-quality platform, despite the indifferent consumer being closer to the high-quality platform. The difference between market shares is lower than socially optimal. A perturbation that introduces a negligible difference between the consumer density on the left and on the right side of the city may disrupt the existence of equilibrium in the model of Armstrong (2006).

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“…However, none of these studies considers the presence of network externalities. We should note Serfes and Zacharias (), who investigate sequential positioning between two firms in the presence of network externalities. Unambiguously, their paper is the most closely related to our study.…”

Section: Introductionmentioning

confidence: 99%

“…Unambiguously, their paper is the most closely related to our study. Nevertheless, there is a significant difference between both studies, because Serfes and Zacharias () assume only a symmetric network externality intensity.…”

Section: Introductionmentioning

confidence: 99%

Sequential product positioning in the presence of an asymmetric network externality intensity

Saito

Matsubayashi

2017

Manage Decis Econ

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In this study, we analyze the sequential decisions on product positioning of two firms in the presence of network externalities. One commonly accepted phenomena in a market where a network externality arises is the first-mover advantage, in which the first entrant into a market can earn a higher profit than later entrants. However, in some recent online services markets, we see that the second mover earns a higher profit than the first mover. This occurs because the second mover strengthens its variety of available functions and services markedly, thereby facilitating consumers' work and communication with its main product, which we call network externality intensity. Based on this observation, we analyze sequential positioning in Hotelling's framework by incorporating an asymmetric network externality intensity between firms. We show that unlike the results of previous related studies, both first-and second-mover advantages can appear in the equilibrium depending on the relationship of the network externality intensity between firms; further, they do not change monotonically with the level of network externality intensity.

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Location Decisions of Competing Networks

Cited by 5 publications

References 16 publications

Price competition in a differentiated products duopoly under network effects

Price competition in a differentiated products duopoly under network effects

Nesting Vertical and Horizontal Differentiation in Two‐sided Markets

Sequential product positioning in the presence of an asymmetric network externality intensity

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