Quality improvement and network externalities

Jaskold Gabszewicz, Jean;Garcia, Filomena
(2005)

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  • Jaskold Gabszewicz, JeanUCLouvain
    Author
  • Garcia, FilomenaUCLouvain
    Author
Abstract
We analyse the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which quality improvement occurs as a result of this competition.
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Jaskold Gabszewicz, J., & Garcia, F. (2005). Quality improvement and network externalities (ECON Discussion Papers 2005/64). https://hdl.handle.net/2078.5/40622