Network Externalities and Market Dominance
构建了垄断和斯塔克尔伯格双寡头模型，分析网络外部性下企业争夺主导市场份额的竞争行为，发现主导企业应采取激进策略，而非主导企业应选择适应策略。
We propose a monopoly and Stackelberg duopoly model for “new economy” markets—with a Beckerian S-shaped demand curve at its center—that allows for intermediate degrees of firm focality and consumer heterogeneity. Because of network externalities, firms compete for the dominant market share, rather than the marginal consumer. This leads to a type of limit pricing—from within, rather than from outside the market—where the nondominant firm captures a positive market share that serves as a consolation prize. We characterize how firms’ technologies, “consumer impulses” (which might be influenced by past sales, defaults, or advertising), and network externalities affect competition, and derive implications for firm strategy. Broadly speaking, we find that the dominant firm should adopt an aggressive “top-dog” stance (akin to, but not identical to, that of a firm seeking to deter rival entry), whereas the nondominant firm should respond with an accommodating “puppy-dog” approach. This paper was accepted by Alfonso Gambardella, business strategy. Funding: R. Akerlof received financial support from the Institute for New Economic Thinking.