Rabah Amir, Tippie College of Business, University of Iowa

On Oligopoly with positive network effects and Incompatible
Friday, 7 April 2017 - 2:30 pm to 4:00 pm
Contact information
Contact person: 
Vicky Barham
Registration required: 
Cost to attend: 
Free of charge
Event language: 
Intended audience: 

Sponsored by « Canada and World Economy » series

We consider symmetric oligopolies with positive network effects where each firm has its own proprietary network, which is incompatible with that of its rivals. We provide minimal conditions for the existence of (non-trivial) symmetric equilibrium in a general setting. We analyze the viability of industries with firm-specific networks, and show that the prospects for successful launch decrease with more firms in the market. This is a major reversal from the case of single- network industries. In terms of the comparative statics effects of entry, we find that this model has properties that are closer to regular Cournot oligopoly than to the case of single-network industries. Finally, we compare the viability and market performance of oligopolistic industries with compatible and incompatible networks, and show that viability, output and social welfare are higher for the former. However, the comparison of industry price, profits and consumer surplus is ambiguous.