R&D in markets with network externalities

Article Abstract:

Network externality is the phenomenon observed when buyers base their purchase decision on the large number of owners of the product they are considering. This phenomenon impacts on research and development decisions and policies of competing manufacturers of compatible components. A new entrant into the market will develop an incompatible technology, while an incumbent will introduce an upgraded compatible product. Of the two, the former faces lesser risk, the latter the greater. Multiple equilibria result in a market with network externalities.

Competition (Economics)

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Dynamic monopoly pricing with network externalities

Article Abstract:

Most network externalities models, such as the Coase theorem, use a static framework which does not integrate empirical evidence. When these evidence are factored in, the results would contradict the conclusions of a static framework. In a network system created by a durable good, there are two important network externalities which can affect dynamic monopoly pricing. These are the 'word-of-mouth,' which reduces buyer's search cost, and the 'learning by doing' externality, which determines the sale of an upgraded component.

Pricing Policy, Pricing, Monopolies, Coase theorem

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The timing of product introduction and the credibility of compatibility decisions

Article Abstract:

The existence of positive network externalities benefit buyers of compatible products. At the same time, markets with such externalities create a complex relationship between the manufacturers' technological decisions, such as compatibility choices and the introduction timing of the first generation product, and government standardization policies. At the international level, these are further complicated by the timing, the speed and the quality of agreement in the standards negotiations.

Product Development, Models, Standardization, International aspects, New products, Product introduction

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