Events

Economics Seminar

Authors:

• Jacques Crémer
  Toulouse and HKU

• Gary Biglaiser
  University of North Carolina

We study the consequences of the heterogeneity of the intensity of the consequences of network effects on the utility of consumers in a dynamic model with free entry and an incumbent monopolist. Even though in a static environment, the profit maximizing incumbent would sell only to the consumers who value network effects, we prove that the presence of consumers who attach a low value to network effects increases its profits. Indeed, their presence hinders entrants who find it more costly to attract the more valuable "high taste for networks" consumers.