Location of Repository

Local network externalities and market segmentation

By A. Banerji and Bhaskar Dutta

Abstract

This paper models interaction between groups of agents by means of a graph where each node represents a group of agents and an arc represents bilateral interaction. It departs from the standard Katz-Shapiro framework by assuming that network benefits are restricted only amongst groups of linked agents. It shows that even if rival firms engage in Bertrand competition, this form of network externalities permits strong market segmentation in which firms divide up the market and earn positive profits. The analysis also shows that some graphs or network structures do not permit such segmentation, while for others, there are easy to interpret conditions under which market segmentation obtains in equilibrium

Topics: HB
Publisher: University of Warwick, Department of Economics
Year: 2005
OAI identifier: oai:wrap.warwick.ac.uk:39

Suggested articles

Preview


To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.