Entry into a Network Industry: Consumers' Expectations and Firms' Pricing Policies
B.E. Journal of Economic Analysis & Policy, Vol. 8, No. 1, 2008
Posted: 8 Sep 2008
Date Written: September 5, 2008
Abstract
Entry into a network industry is modeled, focusing on consumers' expectations formation. Equilibrium expectations are endogenous and they depend on prices, acting as a coordination device among consumers. The model is able to account for aggressive pricing policies by the incumbent and by the entrant. Both exclusion and entry are possible outcomes (depending on parameter values). The threat of entry is beneficial to consumers, even when unsuccessful.
Keywords: networks, entry, expectations
JEL Classification: D42, D84, L12, L14
Suggested Citation: Suggested Citation
Baglioni, Angelo, Entry into a Network Industry: Consumers' Expectations and Firms' Pricing Policies (September 5, 2008). B.E. Journal of Economic Analysis & Policy, Vol. 8, No. 1, 2008, Available at SSRN: https://ssrn.com/abstract=1263902
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