Competition between Networks: A Study of the Market for Yellow Pages
Boston University Industry Studies Project Working Paper No. 104
50 Pages Posted: 16 Feb 2002
Date Written: September 9, 2002
Abstract
This paper estimates the importance of network effects in the market for Yellow Pages. I estimate three simultaneous equations: consumer demand for usage of a directory, advertiser demand for advertising and a publisher's first-order condition (derived from profit-maximizing behavior). Estimation shows that advertisers value consumer usage and that consumers value advertising, implying a network effect. I find that internalizing network effects would significantly increase surplus. As an application, I consider whether the market benefits from monopoly (which takes advantage of network effects) or oligopoly (which reduces market power). I find that a more competitive market is preferable.
Keywords: Network Effects, Discrete Choice Demand, Antitrust
JEL Classification: L1, L4
Suggested Citation: Suggested Citation
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