Network effects, market structure and industry performance

Abstract

This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a …rm's rivals'total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria.We formalize the concept of industry viability and show that it is always enhanced by having more …rms in the market and/or by technological improvements. We also characterize the e¤ects of market structure on industry performance, with an emphasis on departures from standard markets. As per-…rm pro…ts need not be monotonic in the number of competitors, we revisit the concept of free entry equilibrium for network industries. The approach relies on latticetheoretic methods, which allow for a uni…ed treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided.JEL codes: C72, D43, L13, L14.

Mergers and acquisitions carried out by Spanish firms in Latin America: A network analysis study

“…In economics, this methodology has been used to analyse the structure and functioning of competitive markets (Mitchell and Skrzypacz, 2006;Amir and Lazzati, 2011), employment and wage inequality (Calvó-Armengol and Jackson, 2004), the dissemination of information and innovations (Schilling and Phelps, 2007;Fleming, King and Juda, 2007;Galaso, 2011) and the patterns governing international trade (Kali and Reyes, 2006;De Benedictis and others, 2013).…”

Las fusiones y adquisiciones realizadas por empresas españolas en América Latina: Un estudio desde la perspectiva del análisis de redes

“…En el estudio de la economía, esta metodología se ha utilizado en el análisis de la estructura y funcionamiento de los mercados competitivos (Mitchell y Skrzypacz, 2006;Amir y Lazzati, 2011), el empleo y la desigualdad salarial (Calvó-Armengol y Jackson, 2004), la difusión de información e innovaciones (Schilling y Phelps, 2007;Fleming, King y Juda, 2007;Galaso, 2011) Existe también una creciente literatura académica en que se emplea el análisis de redes para estudiar los flujos financieros internacionales en general, aunque su aplicación al análisis de la inversión extranjera todavía es relativamente escasa. Algunos trabajos se han centrado en analizar las crisis financieras internacionales (Chinazzi y otros, 2013;Elliott, Golub y Jackson, 2014), así como la estructura de participaciones accionarias entre empresas transnacionales (Vitali, Glattfelder y Battiston, 2011;Vittali y Battiston, 2013).…”

Revealing Incentives for Compatibility Provision in Vertically Differentiated Network Industries

“…Consumers choose between the goods in order to maximize their net surplus. In this maximization problem, they take the decisions of the others as given and have rational expectations about the size of the networks, as in Katz and Shapiro (, ) or more recently Amir and Lazzati (). As such, in equilibrium, we have that the expected network size coincides with the actual network size .…”