1. Social efficiency of entry: Implications of network externalities
- Author
-
Emmanuel Petrakis and Debasmita Basak
- Subjects
Economics and Econometrics ,Strategy and Management ,media_common.quotation_subject ,05 social sciences ,Policy guidelines ,Social efficiency ,General Business, Management and Accounting ,Microeconomics ,Entry cost ,Management of Technology and Innovation ,0502 economics and business ,Economics ,050207 economics ,Network effect ,Welfare ,050205 econometrics ,media_common - Abstract
We examine the welfare effects of entry in the presence of network externalities. We show that if network goods are fully incompatible, entry is socially insufficient as long as the entry cost is high, the goods are sufficiently differentiated, and the degree of network externality is low. Further, we show that as the degree of compatibility between the network goods increases, insufficient entry becomes more likely. Our findings provide policy guidelines for anticompetitive and procompetitive entry regulations.
- Published
- 2021
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