Third-Degree Price Discrimination, Consumption Externalities, and Market Opening

This study investigates the effects of monopolistic third-degree price discrimination on market opening in the presence of consumption externalities between separate markets. Assuming symmetric interdependent linear demands and constant marginal cost, we indicate the possibility that with negative externalities a monopolist can do better by closing the relatively small market from the social welfare viewpoint, while it prefers opening that market if price discrimination is feasible. This result contradicts the previous literature on third-degree price discrimination and market opening which asserts that, in the case of non-increasing marginal cost, price discrimination improves social welfare if it opens new markets that are closed under uniform pricing.     

How chilling are network externalities? The role of network structure

In an influential paper, Goldenberg, Libai, and Muller (2010) use an agent-based model to demonstrate that network externalities have a “chilling” effect on new product diffusion, i.e. they slow down new product adoption since many consumers wait before enough people have adopted. They perform their simulations using theoretical Moore lattices as the underlying social network of consumers. However, it has been demonstrated in other contexts that network structures can significantly affect the dynamics of new product diffusion, and hence it is worth investigating the same considerations for network externalities as well. I use the diffusion model of Goldenberg et al. (2010) to perform simulations on actual social networks to demonstrate that the chilling effect of network externalities is somewhat offset by increasing network size and average degree of the nodes, but accentuated by increased clustering in the network. My simulations also reveal that the diffusion model used by Goldenberg et al. (2010) does not have the chilling effect tautologically “baked” into it; rather network externalities do tend to slow down new product adoption most of the time, but not always.     

Market coverage and “love of software variety” in the supporting services approach

This paper uses a model of system product monopoly to examine the supporting services approach in network economics. We find that the monopoly sets the software price at the average cost of developing each variety of software. Furthermore, if the function defined for “love of software variety” exhibits too much “love of variety of software,” then there exists only the boundary solution that corresponds to full market coverage. We also show that if the market is partially covered, then there always exist positive network externalities. However, if the market is fully covered, then network externalities vanish.      

Monopoly Pricing of Social Goods

We analyse the roles of network connectivity and topology on the monopoly pricing of network goods which enable social interaction between consumers. Connectivity between network members induces the well-known network externalities effect, while the topological effect is caused by the incompleteness of the social network’s linkage, and it has not been previously recognised in this context. We find that the topological effect counteracts, and dominates, the connectivity effect by reducing the monopoly’s capacity to extract consumer surplus. Our results are seen to hold in real cases of social network businesses. The monopolist benefits from price discrimination based on consumers’ social connections, but this has a social cost as consumer surplus loss is higher than the increase in profits, with the highly connected consumers being the primary losers. Therefore, privacy policies restricting excessive social profiling and tracking can have an antitrust role too. Our approach also extends the theory of multi-sided markets in relation to the underlying relations graph of different market sides.     

The Effects and Consequences of Simultaneously Arising Different Network Externalities on the Demand for Status Goods

The purpose of this paper is to explore how two main forms of network externalities, bandwagon and snob effects, influence the market demand for status goods when they arise simultaneously. If the snob effect is greater than the bandwagon effect, the demand function involving both effects is less elastic than the demand function that does not involve network externalities; however, the market demand function becomes increasingly elastic as the bandwagon effect becomes stronger. By introducing the concept of net social external effect, the change in the quantity demanded as a consequence of the resultant of network externalities can be measured.     

Network externalities,transport costs,and tariffs

This article formulates a reciprocal market model of international duopoly with network externalities to reconsider welfare effects of reductions in transport costs and tariffs. Depending on the magnitude of network externalities, we show two possibilities. One of them, which emerges under strong network externalities, illustrates that freer trade unambiguously improves welfare for any initial level of trade barriers. This finding provides an affirmative evaluation of freer trade.     

Marketing compatible, yet differentiated, products : In search of competitive equilibria when network externalities are at work

Many goods are characterized by the fact that their utility increases with the number of consumers who buy them. It is the case for computers or communication networks, for example. Such goods are said to be subject to network externalities. We study those externalities in the context of a product differentiation model where product characteristics (or the image of the firm) are taken into account.We consider a market where two firms sell differentiated products and we study an equilibrium where the firms are competing in quantities (Cournot model) as well as in quality (two-stage game). We show how the degree of differentiation between the firms (or their products) and the compatibility decision are affected by the externality effect.     

Java and object standardization in the Internet – A way to more competition in the software industry?

The computer software market is a textbook example of network externalities: if a user decides to work with a specific program, the utility of all other users of the same product increases. This increase in utility is not compensated for by the market; thus one speaks of network externalities. Such network externalities lead to a natural tendency towards quasi standardization, favoring a high market concentration on the supply side. This article demonstrates that Java programs combined with an appropriate object standardization may reduce the influence of the network externalities, giving smaller companies a better chance to compete successfully. This revised version was published online in August 2006 with corrections to the Cover Date.     

Marketing externalities in industrial clusters: A literature review and evidence from the Christchurch,New Zealand electronics cluster

Literature on the internationalisation of small- and medium-sized firms identifies location in a geographic cluster of networked firms as a source of competitive advantage. In particular, local networks are cited as a source of market information and referrals that can help firms enter international markets. Co-location and the local interactions that it fosters create externalities that benefit entrepreneurial firms. This paper identifies four types of externalities: supply side, demand side, active, and passive. Supply and demand side refers to inputs to the firm and markets for outputs, respectively. Passive externalities occur simply because firms are co-located, while active externalities only occur because firms are co-located and work together in networks. Representatives of firms in the Christchurch, New Zealand electronics cluster were interviewed about the extent to which they perceive benefits from externalities. A statistical cluster analysis reveals two patterns of responses. Both groups of responses report benefiting from passive externalities. However, about 40% of the firms also benefit from active externalities. These firms are typically smaller and less export intense. The notion of active externalities has implications for the management of firms located in clusters. To benefit from active externalities, managers must develop capabilities that maximise network opportunities. There is also an implication for economic development policy: Resources should be targeted at encouraging active externalities rather than passive, as passive externalities occur without public intervention.     

Economic Benefits of Renting Software

In this article, we analyze the economics of a monopoly firm selling and renting a packaged software product by employing an intertemporal monopoly pricing game to model the firm's pricing strategy. The game models the software product as two versions; the first version is available in the first period and the second, a revised version, is available in the second period. The second version benefits from consumer reports of bugs and requests for additional features. This is modeled using delayed network externalities that take effect only in the second period. We observe that the introduction of the rental product in the first period leads to an increase in profits. We also find that the firm's profits are monotonically increasing with the intensity of the network effect. As the intensity of the network effect becomes stronger, the firm chooses to reduce its prices in the first period to expand the size of its network and later increases prices in the second period. Because many of the customers who choose to rent in the first period subsequently make a purchase in the second period, the firm is able to capture the benefits of network externalities in the first period without reducing sales in the second period. For high levels of network intensity, consumer surplus and social welfare are also higher.     

Improving new technology venture performance under direct and indirect network externality conditions

This study compares the effectiveness of five responses to external uncertainty in markets with network externalities: avoidance, imitation, control, cooperation, and real options reasoning as a form of strategic flexibility. Our analysis of 385 new technology ventures shows that direct and indirect network externalities have opposite effects on the effectiveness of these strategies. Moreover, under network externalities, attempts to make ventures less dependent upon environmental instabilities perform differently compared to attempts to control the environment. Finally, we show that real options reasoning does not always perform better under conditions of higher uncertainty, such as uncertainty due to direct network externalities.     

西部矿产资源开发外部性实证分析

运用西部矿产资源富集地区实地调查问卷与深度访谈数据,分析西部矿产资源开发外部性问题。研究发现,西部矿产资源开发正外部性与负外部性并存,正外部性主要表现为带动资源地经济与社会发展,负外部性表现为对资源地生态环境的破坏。而通过明晰矿产资源产权、强化资源企业社会责任履行、唤醒民众环保意识、统筹利益相关者利益,可促进西部矿产资源开发外部性内部化,实现西部矿产资源合理开发和资源地科学发展。     

第三方B2B电子商务平台定价研究——基于双边市场理论

利用双边市场理论对完全垄断下的第三方B2B电子商务平台进行建模,得出了平台利润最大化条件下的定价策略。平台对买方和供给方收取的注册费是受到任意一方各种参数影响的。     

Strategic Compatibility Choice,Network Alliance,and Welfare

Based on a simple model of compatibility choice under differentiated Cournot duopoly with network externalities, we consider how the levels of a network externality and product substitutability affect the choice of compatibility. In particular, if the level of network externality is larger than that of product substitutability, there are multiple equilibria involving imperfect and perfect compatibility. Furthermore, we demonstrate the conditions for constructing such a network alliance so that firms provide perfectly compatible products. The network alliance is stable and socially optimal.     

The relationship between prior and subsequent new venture creation in the United States: A county level analysis

Minniti [Minniti, M., 2004. Entrepreneurial alertness and asymmetric information in a spin-glass model. Journal of Business Venturing 19 (5), 637-658; Minniti, M., 2005. Entrepreneurship and network externalities. Journal of Economic Behavior & Organization 57 (1), 1-27] argues that new venture creation decisions are interdependent and that the non-pecuniary network externalities and path dependencies of such decisions influence the geographic concentration of venturing activities. We apply her framework at the county level to study the association between prior and subsequent new venture creation in the U.S. Our findings indicate that there is a non-linear relationship between prior new venture creation and subsequent new venture creation, with venturing activities increasing at an increasing rate based on the amount of prior new venture creation.     

The role of social conventions in the diffusion of open source software: Implications for service industries

In information and service products such as open source software, increasing returns occur on the production or supply side, as well as network externalities on the demand side. For open source software, the social community element needs to be integrated with the framework of increasing returns. This paper attempts to show that social conventions, and social herding behaviour are fundamental to the growth of the open source software. Such social conventions legitimise value and provide identification in the global online community and have important implications for service industries in general.     

A Positive Theory of Social Entrepreneurship

I propose a theory aimed at advancing scholarly research in social entrepreneurship. By highlighting the key trade-off between value creation and value capture and explaining when situations of simultaneous market and government failure may arise, I suggest that social entrepreneurship is the pursuit of sustainable solutions to neglected problems with positive externalities. I further discuss the situations in which problems with externalities are likely to be neglected and derive the central goal and logic of action of social entrepreneurs, in contrast to commercial entrepreneurs. Overall, this article provides a conceptual framework that allows understanding the growing phenomena of social entrepreneurship and its role in the functioning of modern society.     

Compatibility Under Differentiated Duopoly with Network Externalities: A Comment

Chen and Chen (J Ind Compet Trade 11:43?55, 2011) analyze the effects of compatibility under system product Cournot competition with network externalities. They show that a firm’s optimal strategy is to set an incompatible system standard, even though perfect compatibility is socially optimal. In this case, a social dilemma arises. However, their result depends on a specific assumption about the network size. We use the framework of Shy (1995) to modify this assumption, and hence show that the social dilemma identified by Chen and Chen (J Ind Compet Trade 11:43?55, 2011) does not arise.     

Understanding consumer repurchase intention on O2O platforms: an integrated model of network externalities and trust transfer theory

The purpose of this study is to propose a theoretical model to explain consumer repurchase intentions in O2O commerce context by integrating network externalities theory and trust transfer theory. The model was tested using the data collected from 376 customers of an O2O platform in China. The results showed that different types of trust, direct and peer network externalities, all have impacts on consumer repurchase intentions. Trust transfer processes occur in O2O commerce. Furthermore, three components of network externalities all impact on trust in O2O platform. The implications of this study from both research and practice perspectives are discussed.     

节能主体差异性对节能政策效率的影响分析

能源问题与环境问题都源于外部性,外部性内部化是实现节能目标的必经之路。借鉴环境政策手段比选模型,结合节能外部性的特点,建立节能成本模型。通过对命令控制手段和市场激励手段的比较分析,证明:节能主体差异性越大,命令控制手段的劣势越显著;市场激励手段不受差异性的影响,始终以最低成本实现目标,因而更有效率。基于此,提出中国节能降耗的政策建议:完善节能财税政策、开发节能交易机制等。