AMU - AMSE
5-9 boulevard Maurice Bourdet
Sarah Flèche: sarah.fleche[at]univ-amu.fr
Agnès Tomini: agnes.tomini[at]univ-amu.fr
This is a survey talk on oligopolies with positive network effects, where two separate models are considered, one in which there is an industry wide network, and one in which each firm has its own network (incompatible with that of its rivals). We provide minimal conditions for the existence of (non-trivial) symmetric equilibrium in a general setting. We analyze the viability of industries with firm-specific networks and show that the prospects for successful launch increase for the first model, but decrease for the second as more firms enter the market. A central part of the paper compares the viability and market performance of industries with compatible and incompatible networks and shows that viability, output, (endogenous) demand, and social welfare are higher for the former. However, the comparison of industry price, profit and consumer surplus requires respective qualifications, of a general nature for the former two but not for the latter. We also analyze the problem of free entry into network industries. Overall, these results provide theoretical grounding in a general but not universal sense for the conventional view that compatibility leads to superior performance, which was hitherto based on case studies and stylized facts.