Asymmetric Networks in Two-Sided Markets

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Asymmetric Networks in Two-Sided Markets

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Title: Asymmetric Networks in Two-Sided Markets
Author: Ambrus, Attila; Argenziano, Rossella

Note: Order does not necessarily reflect citation order of authors.

Citation: Ambrus, Attila, and Rossella Argenziano. 2009. Asymmetric networks in two-sided markets. American Economic Journal: Microeconomics 1(1): 17-52.
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Abstract: This paper investigates pricing decisions and network choices in two-sided markets with network externalities. Consumers are heterogeneous in how much they value the externality. Imposing restrictions on the extent of coordination failure among consumers generates clear qualitative conclusions about equilibrium market configurations. Multiple asymmetric networks can coexist in equilibrium, both in the case of a monopolist network provider and in the case of competing providers. These equilibria have the property that one network is cheaper and larger on one side, while the other network is cheaper and larger on the other side. Product differentiation is endogenized by consumers' network choices.
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