Events at CERGE-EI

Prof. Jacques Crémer

Toulouse School of Economics, France

Authors: Gary Biglaiser and Jacques Crémer

Abstract: We study the dynamics of competition in a model with network effects, an incumbent and entry. We propose a new equilibrium concept which takes formally into account the strategic advantages of incumbency in a static model. We then embed this static analysis in a dynamic framework with heterogeneous consumers. We completely identify the conditions under which inefficient equilibria with two networks will emerge at equilibrium; explore the reasons why these inefficient equilibria arise; and compute the profits of the incumbent when there is only one network at equilibrium.

Full Text:  “The value of incumbency in heterogenous networks”