Dynamic competition in imperfectly competitive network industries
(2009)
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- (en) In imperfectly competitive network industries, firms' market shares are endogenously changing over time as a consequence of the strategic complementarities among consumers. This thesis deals with the dynamic aspects underlying the behavior of firms participating in these industries, focusing on two distinct forms of competition: price competition (Part I) and competition in networks' sizes (Part II). Chapter 2 and chapter 3 investigate dynamic price competition when firms interact in two distinct but interrelated markets: a primary market and an (imperfectly) competitive aftermarket, in which there are indirect network effects. In the case of linear network effects, it is shown that the lack of competition in aftermarkets fosters competition in the primary market and, in addition, there is always a network premium (chapter 2). Differently, in the case of monopolistic aftermarkets with multiplicative network effects, larger firms are endowed with more incentives to adopt price-cutting strategies (chapter 3). Chapter 4 deals with dynamic price competition in a duopoly with non-cumulative delayed network effects. In a finite horizon setting, it is shown that both price strategic complementarity and substitutability may occur along the V-shaped equilibrium trajectory of prices. Equilibrium market shares follow an oscillating path, along which a phenomenon of dominance inversion occurs. Chapter 5 raises the problem of minorities' survival in the presence of downward demand spirals entailed by positive network externalities. Relying on the example of thematic clubs, this chapter illustrates why and in which circumstances survival problems may occur. Finally, chapter 6 analyzes survival issues in the context of an application to the media industry. It shows that network externalities do not necessarily lead to the eviction of the minority's newspaper. However, even when both newspapers survive, the majority's newspaper always has an economic advantage over its rival.
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Pinho Resende, J. R. (2009). Dynamic competition in imperfectly competitive network industries. https://hdl.handle.net/2078.5/92369