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Entry in a Network Industry with a Capacity-Then-Production Choice

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Issue Date
2016-08-07
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.29 No.3, pp. 411-429
Keywords
Network externalitiesEntryDeterrenceCapacity choiceMonopolyDuopoly
Abstract
This study investigates the effect of consumption externalities on entry decision in network industries. A non-monotonic relation exists in the monopoly/duopoly profit differential. A monopolist which has to pay a cost to maintain his dominant position, such as a license fee or lobby expenditures, can block more easily entry for a wide range of network externalities unless these externalities are not exceedingly intense. Therefore, network externalities work as an innocent barrier to entry. The capacity choice of the incumbent in a capacity-then-production model reinforces the innocent entry barrier effect for the potential entrant.
ISSN
1225-0279
Language
English
URI
https://hdl.handle.net/10371/97048
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of Economics (SJE)Seoul Journal of Economics vol.29 no.1~4 (2016)
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